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Forex Trading Strategies – Forex Trader’s Best Friend
Last week I wrote about the advantages of using a trainer to help you with your trading. While finding a trainer can be a time consuming task here is something everyone can do right away to markedly improve their performance -- start a trading diary. A diary may seem like a nuisance -- something only teenage girls maintain -- but trust me, it is well worth the effort.
There are plenty of very good FX platforms out there that will marry all of your trades for you and will provide you with a seamless record of your trading performance, all at a touch of a button. However, I prefer to do things the manual way by cutting and pasting every single trade from my brokerage account into an Excel spreadsheet and then arrange them myself.
A very long time ago, when computers were just becoming popular tools for trading, I remember reading about old time technical traders who lamented the fact that the new machines eliminated the lost art of graphing the price action by hand. At the time, I found their Luddite grousing amusing but now as I meticulously build my trading diary one trade at a time, I’ve come to appreciate their point. In order to truly absorb and understand information the human mind needs time. The act of writing out your activity trade by trade not only helps you maintain good records but also allows you to analyse your actions with much greater detail.
When you are scalping ten to twenty times per day there is no time for reflection, but on a quiet Saturday morning as you transcribe the week’s activities you can begin to see what is working and what is not. Here is one thing that I learned from my trading diary that has helped me immensely. Winning trades resolve themselves very quickly while losers drag on like a line at the Motor vehicles bureau. I suspected that this was the case when I first started trading my strategy given the fact that it is based on momentum, but even I was surprised at the speed of the winners. More than a few of my winning trades went from limit entry to take profit in less than one minute. The losers almost never proved that quick dripping pips like an FX version of Chinese water torture until they would eventually stop me out.
As result of my research I put a time stop as well as price stop to my trades and my risk control improved markedly. There are a million little adjustments like that that you may make as result of keeping a trading diary. I recommend doing it on a weekend when the markets are closed and you can have clear, objective assessment of your performance that week. Remember the function of the diary isn’t to tell you whether you’ve lost or won -- your account equity can answer that question in an instant. The function of a diary is to make you question your trading methodology so that you may refine and improve it.