Trading system analysis
On almost every forum or financial blog, one or more sections are devoted to trading psychology. Like road signs warning of a sharp turn or a slippery road, a description of online trading should be accompanied by a description of such an important topic as psychology. Without knowing the basics of psychology, a trader, like an inexperienced driver, can fly into a ditch. And neither the client nor the broker needs it. In the second case, it means, of course, that the company works honestly and for a commission, but this is a separate topic, which we will not touch upon this time.
Why do traders lose deposits?
As previously stated, there's a lot of information on psychologyand all of it is available for study. Some companies, including ours, hold training webinars, one of the topics of which is the psychology of trading. And, it would seem, with such an abundant flow of information, all traders, beginners and advanced, should have already understood the topic and apply all the rules, but statistics say otherwise.
Unfortunately, standard tables of contents such as "risk," "fear," or "emotion" appear to readers as just a set of letters and nothing more. All these situations are summarized and don't conjure up any associations for the traderwho, reading the text, cannot implement the advice in real trading. In ForTrader.org we will try to reveal this topic from the practical side, giving examples from our personal trading and the trading of our traders.
Having analyzed the trading history of our traders who made losing trades when making wrong trading decisions, it became clear that most of them calculated the volume of positions disproportionate to the trading deposit. Some of the clients managed to make no more than 3-5 trades. Interestingly, the loss of deposit due to a small series of losing trades is not at all does not mean the use of a losing trading system. The system could be either unprofitable or profitable. But traders left themselves no opportunity to find out. It's obvious typical greed, the desire to make money as quickly as possible.
Analyzing the trading system
Now we are not going to talk about the loss of the client's deposit. We're talking about the fact that for trading system analysis a relatively small number of trades were used.
The trader uses the optimal volume, but after receiving a series of losing positions, decides to abandon this trading system, and the strategy is sent to the trash box.
Of course, we cannot say unequivocally that such a decision is wrong. However, from my personal experience and the experience of our clients, with whom we have known for a long time and constantly discuss trading aspects, I can state that haste in making a decision to abandon the trading system due to a small string of losses. There is a clear lack of patienceThe irony is that this search can go on forever or until the trader's patience runs out or money runs out. The irony is that such a search can go on forever or until the trader's patience runs out or money runs out.
In both cases. trading history is clearly insufficient to determine the effectiveness of a trading system. How many will be enough then? Some traders cite such figures as 25, 50 and even 100 completed trading positions. I have chosen the middle for me. In my opinion, 50 completed trades are quite enough to draw conclusions about the trading system, but the value can still be any, the main thing is that the more, the better.
As cliché as it may sound, you should not take too much risk in trading and prematurely abandon your trading system. Using the optimal risks and the necessary amount of trading history to analyze the strategy, a trader always has the opportunity to make adjustments to your strategy in the event that trading is not profitable for an extended period of time.
All or nothing
After a series of losses, the trader is unable to cope with his emotional state, and often he is unconsciously starting to win backFor example, it uses the increase in position volume, known to all as the Martingale method. In this case, the volume of positions grows and losses increase. The situation drives the trader into a corner from which it is very difficult to find a way out.
One of our clients had a similar case, and it ended sadly - with the loss of most of the deposit.
In addition to volume, the trader, completely departing from the rules of his trading system, added several new instruments (currency pairs) to the trade. No other way chaos in the trading accountIt could not be called that. The trader practically had no control over his actions, guided by the principle of all or nothing. In the end it turned out to be almost "nothing".
However, I would like to note that later on the trader realized his mistakes, drew conclusions and continued trading. Later he recalled this difficult period with a smile on his face. The deposit was fully restored due to correct trading decisions, but here is the following no one can make up for the nerves and time wasted..
This happens to many traders. Probably, each of us has faced similar cases in trading. And we all experience them in different ways. Not everyone can get up, "shake off the knees" and move on. But it should be done, because, perhaps, your key to understanding the market will be found soon.