Around this time of year, we often review the past year and also look forward to the next. We look at achievements and goals and at ways to become a better trader in 2020.
Change is the only constant
There are many ways to step up my trading game but for me, 3 themes stand out. In the past, these 3 things have resulted in the biggest positive change in my own trading.
As we are moving into the new year, I wanted to share these with you.
1. Validate Your Trading Strategy
The other day, someone mentioned the following (when looking at strategies he found online):
I can’t figure out which strategy is legit or not
To which my answer was: backtest it!
For any strategy you trade, you should get into the habit of backtesting it in order to validate it has an edge.
Backtesting will also give you the necessary confidence you need to trade the strategy live. Not to mention the benefits of having a quick feedback loop that allows you to improve the strategy quickly.
That’s why I’m always surprised to see people avoid backtesting and instead just relying on hope. If this is you, promise to yourself that in 2020, you take the next step and backtest your strategy!
You can do so in 4 simple steps:
- Write down your strategy rules
- Decide on backtesting software (Forex Tester 4, TradingView, etc)
- Define a testing universe (e.g. 2014-2019, EURUSD on the 4H TF)
- Start testing!
And yes, it might take a while to get a good sample size. But it sure beats not testing your strategy at all 😉
2. Learn to Code And Automate Your Trading
Have you ever missed a trade, just because you were not in front of the charts? Or maybe you have a strategy that works great but you can’t really trade it because you have a full-time job?
Automating your trading can be a solution for this. With MT4 Expert Advisors, for example, you can automate entries, trade management, exits and much more.
The benefits are obvious: your trading is going to be more objective and consistent and it allows you to scan more markets for potential trade setups. Emotions will still be there but are easier to control with an Expert Advisor.
Not only that, but you can also backtest your strategy automatically and suddenly, a 10 year backtest of your strategy only takes one minute.
Worth considering, I’d say.
👉 Interested in learning how to program MetaTrader 4 EAs yourself? I have just released a full video course with 34 lessons and over 10 (!) hours of video. No programming experience required!
Trade Reviews Lead To Breakthroughs
You need to journal your trades.
And funnily enough, it’s not usually the journalling that will turn things around. But it’s a prerequisite to the one thing that WILL lead to big improvements in your trading: trade reviews.
For every major breakthrough I have made in my strategy, it happened because I planned long sessions of trading reviews. I simply sat down with my trading journal and reviewed the past 50-100-150 trades.
What’s the average MFE? The average MAE? What trade setup worked well and what resulted in worse results? What piece of confluence consistently gave me a higher average win rate? What was my best day of the week to trade? How about the worst?
Asking yourself key questions, armed with the data from your trading journal, will lead to insights that cannot easily be found on a trade by trade basis. Moreover, finding a consistent pattern in the past 100 trades is considerably more significant than observing something in that single trade last week.
Make some time for trade reviews on a weekly, monthly and quarterly basis and ask a lot of “WHAT IF” questions. For example: what if I had used a 20-period ATR with a multiple of 3 to take profits? What would my P/L look like?
That is what will get you to the next level as a trader.