Be Profitable With Edgewonk - Your Professional Trading Journal

Do you know your potential performance? And where you leave money on the table?
Edgewonk can tell you exactly in which situations you are losing out, or improving, by trade management!



Moritz

Cheers! We are doing our best .

Hello traders,

today we have something very special for you. Maximizing growth and minimising drawdowns in one step can be achieved by using a position size that fits your trading strategy. Take a look!

How To Find The Best Position Size For Your Trading In 3 Steps

With the help of the Trade Simulator and the Risk of Ruin statistic, traders can fine-tune their position sizing approach to meet their objectives which are usually achieving a certain return, minimizing drawdowns or a combination of both.



The Risk Simulator

The Edgewonk Risk Simulator takes your current trading performance, analyzes your performance metrics such as winrate, average reward:risk ratio and position size and then simulates the outcome of 500 random trades based on your personal trading metrics.

It visualizes a potential equity growth scenario (Pess F9 to start a new simulation) and also provides a statistical output for the size of winning and losing streaks, the %-gain and the Risk of Ruin.

The Risk Simulator, therefore, provides information about a possible scenario which you can expect over the course of the next 500 trades. This will prepare traders with ideas what to expect and also shows how likely certain drawdowns are. You can also use the Edgewonk filters (green and red buttons) to analyze the potential performance of specific setups or strategies, trades with a certain position size or reward:risk ratio or use any other filter to evaluate your potential future performance.

Risk of Ruin

The risk of ruin statistic is very important to evaluate the importance of account swings and drawdowns. The risk of ruin states how likely it is, based on performance metrics such as expectancy and account volatility, that a trading method loses all money in the account, or a significant amount.

The lower the expectancy of a trading system and the higher the swings of a trading method, the higher the risk of ruin. In the upper Risk Simulator of the Edgewonk trading journal, the Risk of Ruin uses a ruin barrier of 90%. This means that if the Risk of Ruin figure shows 80%, there is a 80% chance that your trading method will receive a drawdown of 90% or higher.

In the manual Risk Simulator at the bottom, you can manually change the Ruin barrier to any level you want.


How to optimize position size with the Risk Simulator

Step 1 Choose the trading strategy you want to optimize
Select one strategy or setup for which you want to optimize your position sizing in the upper Risk Simulator. Then, take the performance metrics such as winrate, position size and risk:reward ratio and copy them into the lower Risk Simulator

Tip: It is advisable to optimize position sizes for individual trading strategies to get the best effect. Optimizing position size for several different strategies at once can lead to mixed results because the underlying dynamics (such as winrate, risk reward ratio et al.) of trading strategies can be very different.

Step 2 Set the Ruin Barrier
Set your Ruin Barrier. This is the drawdown that you are willing to accept. Most traders will set the Ruin Barrier too high which means that they set their position sizes too high afterwards, which subsequently leads to drawdowns they cannot handle emotionally. Therefore, we suggest to keep the Ruin Barrier smaller than 15% to 20%.

Step 3 Find the optimal position size
Now you can start altering the position size and see how the Risk of Ruin number changes.

We highly recommend to choose a position size that keeps the Risk of Ruin number below 15%, even better if you keep it below 10%. If you are an amateur trader and do not have much experience with trading, keeping the Risk of Ruin below 5% and as close to 0% as possible will provide the best results.

Tip: The bottom Risk Simulator shows you 3 different curves (one white and two green curves). The further apart the three lines are, the more volatile equity swings usually are. You will also be able to see that once the Risk of Ruin number crosses 15%, the equity curves will show a very high volatility. Therefore, keeping the Risk of Ruin number low will also help reduce account swings.

And this is how you proceed with every trading strategy if you want to optimize your position sizing approach to meet your investment objectives and risk tolerance. Unclarities? Contact us we will assist you with any questions around the Edgewonk trading journal.

As always, thank you for reading!
Moritz

One of our most viewed videos is titled "Results- vs. Process-Oriented Thinking And How To Think Like A Professional".
It's simple, really: As long as you equal winning trades to success and losing trades to failure without going deeper into the reasoning behind the trades, you will be in a lot of pain when trading. Possibly so much pain that you are going to give up sooner rather than later. But see for yourself how to hack your reward process in trading!



Moritz

One of the biggest problems of conventional Trading Journals is missing customization. Edgewonk has the perfect solution - with the powerful custom stats there is absolutely nothing you won't be able to track. If you want, you can even track how the stars align :nerd:.



Have a great weekend!
Moritz

A good Monday to everyone! Today we are going to do something a little bit different: any success is based on an organised and structured effort. So we thought, let's show you how to organise your trading desks to free up as much brainpower as possible in order to make better trading decisions!

http://www.edgewonk.com/9-tools-for-...ore-effective/

Enjoy and have a good start into the week!
Moritz

Hi traders,

as of yesterday we have a new free tool online, a trading strategy analyzer - it will only take you a few seconds to find out whether your strategy is going to lose or win you money in the long run, and what the variance is likely going to be. Check it out here.

You don't know what your winrate or average RRR is? Then it's about time you get a professional trading journal and start taking your trading serious right here, right now. It only takes a few seconds to sign up for the free trial.

Trade well,
Moritz

Hi traders,

to help you with our newly released Trading Strategy Analyzer, we released a short article. It will help you to better understand the vital connection between trading metrics.

http://www.edgewonk.com/the-new-edge...risk-analyzer/



Moritz

Hi traders,

many of you are experiencing problems with anxiety, tilt, or other things our brain does to us that we do not even notice. And then suddenly, again we spewed off the winnings of one week in one day. How did that happen? These problems are in fact...quite easy to overcome. The answer is, well, read on.

The Psychology Of Losing – Conquer Your Neanderthal

Whether we win or lose, in an ideal world this wouldn’t affect our performance or thought process at all. We would still feel joy when we win and experience just a little bit of pain when we lose. However, in an ideal world, no one would have to work for his money anyway, so that’s a superfluous thought.

A lot of things happen in our brains when we enter the trading-battlefield and every person handles situations differently, based on their personal history, characteristics, and experiences.

In order to effectively handle the thoughts our brain generates and how it tries to deceive us, we have to first be aware of the mechanisms at work.


Your Mind Is The Greatest Trickster
Thousands of years of evolution have granted us the gifts of self-awareness and self-reflection. This allowed us to thrive and rise to the top of the food chain on our planet. However, it also brought a lot of problems as well. Depression, anxiety, and other mental sicknesses of all kinds are the price we had to pay for our intelligence.

The brain adapted fairly well; it developed mechanisms to protect us from harm, just like our immune system kills most of the viruses that enter our body. For the most part, our brain simply makes bad things and memories go away – we simply forget about them. This is why in our memories, everything seems so much better than it actually was. We only remember the things we want to remember.

This suppression mechanism happens unconsciously and can be a blessing, but in the world of trading, gambling and investing it will get the best of you. Forgetting about the past losses or major mistakes you made during trading can be harmful to the learning process of traders.


Self-Awareness Is Not A Mirror Of Our Abilities
The house of mirrors, which you can find in theme parks, has a distortion effect and a similar process is also at work in our brains. We do not objectively see our abilities, but we perceive our abilities and skills how we would like them to be.

When a lack of self-awareness and over-confidence come together, which is often the case in trading, traders make significant and impactful mistakes when it comes to judging their own abilities.

Although this served as a protection mechanism earlier in the human history, when it comes to trading, the evolution hasn’t caught up yet and traders have to actively counteract negative patterns.


The Fight Or Flight Response
When our ancestors had to face potentially dangerous situations, there were only two options: fight or flight. Our body was pumped with adrenaline and in such a state of mind, only our natural reflexes work, while processing the situation rationally to come up with reasonable solutions does not work.

Blood flows into our muscles and our breathing becomes faster and shallower. Our cerebrum stops all activity and our cerebellum, where our muscle memory sits, takes over. This means, we stop thinking, and we start reacting. Simple as that.

In trading, traders often enter the fight or flight mode. This means that they can only resort to what they already know and not come up with creative solutions or learn new things when the primal instinct takes over.

For many other professions, even for soldiers, there are practice matches and dry runs, where they can learn and improve in a non-lethal environment. For traders, this would be a demo account which most do not fully make use of. They go straight to the battlefield and never experience a learning effect because they just react and give in to their impulsive decision-making processes.

One of the greatest philosophers of recent years, Peter Hacks, once said that you can either talk, or think, but you can’t talk and think at the same time. That’s why when two people argue emotionally, they never reach a reasonable result. Granted, it has a cathartic effect, but no solutions will be found. Sustainable solutions can only be found by sitting down at a desk and starting to actively think and process all available information carefully.


Coming Up With Solutions
The solutions are often very obvious, although they might seem difficult for a lot of people.

To objectively check your trading results and performance, keep a trading journal. You want to learn from your past mistakes and improve? Keep a journal. And if you want to practice humility and self-awareness? A trading journal will also help.

When you are in the middle of the battle, you can only execute what you have learned before. You can’t learn, you can’t improve and you can’t think clearly during the heat of the battle. These effects are reinforced once a trader enters a losing or winning streak, as in both cases, your brain cannot rationally process the information and the flight or fight mode is very pronounced.

Once a trader is more experienced, learns to control his emotions better and avoids the gambling-mindset, his coping mechanism will work better and he will be able to make even better decisions with the pressure of live moving markets.

Although we very often recommend keeping a trading journal, and you might even think we are very biased, keeping a trading journal is what you absolutely have to do in order to become profitable. Every trading website, book and professional trader knows about the importance of keeping track of his performance.

You have to be humble, you have to be self-aware, you have to self-improve and you have to practice immense discipline in order to turn a dime in trading. This will not be achieved easily, but once you actually accept that you need improvement at trading , once you actually believe from the bottom of your heart that you are a losing trader and that you will never become better unless you start working as hard as you can, you actually have a chance to make it.


So, whatever you do - work hard, and all will be good.
Moritz

Our partner site Tradeciety has just released their Trading Academy...one of the most comprehensive places on the internet to learn and advance your trading - for free. No bullshit education. No pipe dreams about making millions in a week. Just plain and sound advice to make you a profitable trader. Check it out.

http://www.tradeciety.com/trading-academy-overview/

Enjoy your weekend!
Moritz

Hi traders,

we improved our Trading Strategy Analyzer and are happy to present to you three new links to simplify your trading:

1. The Strategy Analyzer works as before, based on metrics from your trading strategy you can easily find out how your strategy will perform over the long run, and what kind of returns and variance you can expect.

http://www.edgewonk.com/strategy-analyzer/

2. The Trading Income Calculator tells you, again based on your strategy, how much capital you need in order to reach a target annual income which you can specify. Align your expectations to reality and you will become a great trader.

http://www.edgewonk.com/trading-income/

3. The Position Size Calculator is designed for Stock traders and tells you how many shares to buy based on your entry, exit and risk parameters.

http://www.edgewonk.com/position-size/

Enjoy the toys! I dearly encourage you to play around with the Trading Strategy Analyzer and the Trading Income Calculator...a few dreams will burst, but at least you will be saved from REAL nightmares.

Have a great week ahead!
Moritz

Good morning, people!
Many of you probably have multiple entries and exits incorporated into their trading strategy - and don't know how to analyse whether this is beneficial or not to their trading. Edgewonk to the rescue! We show you how easy it is to handle multiple exits and entries in Edgewonk and how to analyse the performance of your entry and exit strategies. Check it out!

Entering Trades With Multiple Entries And Exits Step By Step

Often, traders use multiple entries or exits to build their position or to scale out of a trade. The Edgewonk journal can handle such trades effectively while providing very detailed analytics about your performance and behavior.

Why we don’t use contract size or amounts of shares
The Edgewonk trading journal does not ask you to enter the amount of shares that you bought or the amount of contracts for a trade. The reason for this approach is simple.

First, we use an algorithm that calculates your position size automatically after you have put in your trade details such as entry price, stop loss price (remember, without a stop loss in place, determining position size is not possible) and the outcome of a trade. This approach is much more accurate and does not require you to enter the contract size.

Second, when using multiple entries/exits, entering how many shares you bought or sold can become tricky. Since Edgewonk is using one row per trade, our position sizing algorithm is much more accurate and makes the data entry much easier as we will see in the coming examples.


Trade scenarios and Edgewonk data entry

1) 1 Entry and 1 Exit
This is the basic format which requires you to use one new row in your Edgewonk journal. This is self-explaining and you just enter entry price, stop loss and take profit price, as well as the outcome and the field ‘Original TP hit?’ (read more here about this special feature). Afterwards, you can assign custom comments and tags to the trade.



2) 1 entry and 2 exits
Let’s say you entered a trade and did not close the whole position at once, but scaled out and used two different points for your exit. For such a trade, you have to use two separate rows. Whereas the first part of the data entry is the same for both trades, only the exit price and the amount of money you made on each trade differs.

The red arrows mark the differences between the two lines. Again, the position size and the level of risk is calculated through the outcome of the trade and the stop loss level (which represents the potential risk) and entering position size is not required.



Tip 1: For every closed out portion of a trade, you have to use a separate row in Edgewonk. The reason for this becomes obvious in the next example.
Tip 2: You can set up a Custom Statistic for tracking and analyzing multiple entries/exits even more effectively. Read more about the Custom Statistics here.
Tip 3: Alternatively, you can use the scaling in/out function to automatically copy some relevant trade data into the next separate row to make entering trades faster. Or use the copy/pasting keyboard combination to enter your trades with multiple entries/exits faster (CTRL + C / CRTL + V).


3) 2 entries and 1 exit
The other possibility would be if you have a trade with two different entries and one exit. This kind of trade is very similar to the previous one. You again have to use two separate rows in your Edgewonk trading journal, but this time only the entry price and the outcome differs. The red arrows mark the differences.



Tip: There are unlimited possibilities to use the Custom Statitics when it comes to tracking multiple entries/exits. One solution would be to create comments like ‘2nd entry’, ‘2nd exit’, ‘3rd entry’, ‘3rd exit’ and so on. Afterwards, you can filter your trades and performance in the other Edgewonk analytics features based on these comments and evaluate how multiple entries/exits perform for you.

4) 2 entries and 2 exits
Scenarios with multiple entries and exits require a short time to get used to, but after you have understood the dynamics, they are just as easy to enter as well. It is important to understand that whenever you close out a part of a trade, you use a separate row in your Edgewonk and by dissecting the following trade scenario, you will see how Edgewonk works.

What happened during the trade:
1 – Bought 50 shares @ 127.00
2 – Bought 30 shares @ 128.00
3 – Sold 40 shares @ 131.00 from entry at 127.00
4 – Sold 40 shares @ 132.00. 10 shares were from the entry at 127.00 and 30 from the entry at 128.00.
To enter such a trade, you need 3 different lines in your Edgewonk Trading Journal. Although it sounds confusing, once we take a look at the actual Edgewonk data entry, it becomes very clear. Always keep in mind, for every closed out portion of a trade, you have to use a separate row in Edgewonk.



Question: Doesn’t using multiple rows distort my winrate?
Traders often worry about this aspect and believe that if they use two or more separate rows per single trade, their winrate will be affected. However, the truth is, not following such an approach will result in inaccurate performance data.

What if you used two different exits for your trade, and although price reaches your first take profit order, it turns ahead of your second and results in a loss. Or, what if you use two different entries with different stop loss order levels and whereas one stop loss gets hit, the other trade goes to your take profit. As you can see, entering trades with multiple entries/exits separately yields much more accurate results and can provide completely new insights about your performance and trading.

You still have questions? Send us a message and we are happy to help you out! You want to try Edgewonk? Check out our free trial and see how Edgewonk can help your trading.


As always, thank you for you time.
Moritz

The Art Of Learning Or How To Properly Use Your Brain

Everyone knows it from school – we have to study for a test but we simply can’t concentrate and absolutely no information wants to enter our head. It’s like there is an invisible barrier and we can’t figure out how to make it go away. In fact, we don’t even have the motivation to make it go away because we are not interested at all in how the Egyptians built their pyramids a gazillion years ago.

And that is indeed reason number one why that kind of knowledge leaves our brain faster than we can say Mississippi – we are not interested in it. When it comes to trading, however, we are interested in the subject, or at least we think we are. So why is it so hard to improve?


Determine your learning style
First off, unfortunately, most retail traders, or let’s call them retail market participants instead, are really not interested in trading at all. Most of them are just interested in making money. But studying, working, learning, being passionate about the markets? No.

So being motivated is criterion number one for successful learning, and staying motivated can mostly be achieved through progress. Making progress in the most efficient and fastest way is done when you study according to your personal learning style. It is very easy to figure out what your learning style is by doing this test.
In short, there are three learning styles:

-Visual (prefers using images, pictures, colors and maps to organize data and information)
-Auditory (likes to work with sounds, music or recordings)
-Tactile (who learn through experience and doing things)

Depending on what kind of learner you are, you have to structure your material and processes accordingly. We will show you how this translates to trading and Edgewonk in a bit, but let’s first look at a few more statistics about learning styles.


The 5 channels for acquiring information
Independent from learning styles there are 5 channels for learning: listening, watching, listening and watching simultaneously, explaining something to yourself, and actively doing something yourself. Each of them, as science found out, has a different rate of memorization. When we listen to something, we approximately only keep 20% of the information in our brains. When we watch something, the number goes up to 30%.

For listening and watching at the same time which is the traditional teaching style in most schools around the world, we can even remember up to 50%. But nothing beats explaining something to yourself, which can also mean writing something down in your own words (70%), or actively doing something yourself (90%). (Source 1, Source 2)



What you will find is that the numbers differ slightly from source to source as of course they are an approximation acquired through different studies, however they all have one common denominator: doing something and actively participating in something is the key to learning sustainably while experiencing something passively will only yield minor results.

Trading itself is passive, even though you click buttons you merely react on the knowledge you possess from studying, reading books, etc. But there will be no new knowledge creation by trading. You start participating actively and creating new knowledge for your brain to work with when you track, review and analyze your performance while not trading.


Why the teacher always learns more than his students
The latter two are by the way also the reason why the teacher always learns more than his students, even if he has been teaching the same class for years. Formulating something in your own words, and then acting upon those words, burns the information deeply into your brain. My teacher in high school always said that if before a test you write a really good cheat sheet, you won’t even need it.

He was a wise man. A good cheat sheet has a lot of summarized information written down on as little space as possible – to do this you first need to comprehend the material, decide on what are the most important details, and then write them down. You will remember almost everything on that cheat sheet after you finished it and you won’t even need to look at it.


The form of the learning material matters
Additionally, it matters in which way, shape or form the material that you are learning comes to you. Is it a very theoretical book, a picturesque movie, are there exercises, are there examples for practical applications, etc.? In general it is much easier to learn if blunt theory is accompanied by examples of practical application – something that math teachers, after centuries of teaching their art, still do not understand.

Either they teach their theory in a very dry manner which is by far the worst thing to do especially if you have disinterested teenagers sitting in front of you. Or, if they give examples for practical application at all, they go like “how long does it take to fill a swimming pool of size X if my water hose shoots x liters of water in x amount of time?” – well, what can I say, how does this really relate to real life?


So I have acquired the knowledge. How do I keep it?
By utilizing it; knowledge has to be utilized. The best example for that are foreign languages – if we don’t use them after studying them, our vocabulary quickly diminishes. Our brain is bombarded every day with tons of information – approximately one day after learning something we already forgot around 66% of it. So utilization and repeating, repeating, repeating is the only way to really make something stay in our long-term memory.

And a good night’s sleep – no sleep, or rather, no REM phase, no memory build-up, as again, science found out. We can remember things we learned the day before much easier if we get a proper 7-8 hours of bedtime.


How does all of this translate to trading?
In trading, there are two sources of study material.

1. External sources, like this web page and any material produced by others, e.g. books, DVDs, seminars, forums, strategies, etc.
2. Internal sources, which are: your own trading and your own mind.

Source 1 is our primary source of information when we start out trading, we need someone else to teach us the basics to get going. In whatever way the material is presented to you, you should structure it according to your learning style and internalize everything efficiently. If you are just starting out you will not have the ability to distinguish between good and useless, or even worse, damaging content. You will have to learn everything and develop your own ability to judge – this will come over time. Make sure not to specialize too soon and be open-minded, get a broad picture that engulfs everything trading has to offer, and then dive deeper into the fields that interest you.

I myself am a visual learner, so I have to write everything down, plus where it is possible, create diagrams and charts. It does not matter whether it is a text, a video, a podcast, I will write down the key points in my own words and then try to visualize the most important content, just using pen and paper.

If you are an auditory learner, speak the key points out loud again and again. If you are a tactile learner, immediately go to your charts and try out what you just learned (if you are new, stick to demo to avoid any damage). And so on, you get the idea.

To structure your learning material I recommend software like Evernote or Scrivener which both are immensely helpful when creating your own personal database of knowledge – over time they will become the backbone to your brain.

When it comes to external sources, make sure to learn quickly and efficiently and over time develop an ability to rule out useless and damaging content. However, if you want to step out of your baby shoes and really want to master a craft, you have to study yourself and your ability of executing that craft without any biases and then learn from that. This is where most people fail and where the sheep will be separated from the goats.


Becoming a self-sustaining learning machine
The most successful Poker players I ever met could tell me a story about every key hand they played in a tournament 5 years ago. They would know who was sitting at the table with them, how big the stacks were, what their perceived image at the table was, how the hand played out, and so on. Every little detail was up there, in their brain. The most successful traders I ever met had the same ability – at the end of the month when reviewing their statements, only by looking at the numbers they would be able to tell me why they took a trade, what they did right and what they did wrong, how it played out, and how they managed it. Almost like they had a photographic memory of sorts – but I am sure, most of them don’t.

How many of your last trades do you remember? I bet most traders can’t even remember the trade that busted their last account. It’s true, insane, but true.
If you do not acquire that level of passion where you are so in tune with your trading that you can remember every little detail about every trade you made at least in the last 4 weeks, and the lessons you should have learned from each one of those trades, you will never make it.

Additionally, you will need to have the ability to distinguish between luck and a well-played plan, especially in a business of probabilities where cause and effect are often not as obvious and connected as we wish they were. There will come a point when you can only learn from yourself, for yourself. No trading book and no seminar will help you, because the material in them is just another variation of what you already know. You absolutely have to identify, judge, learn and remember from situations and experiences about your own trading.

External sources will help you stop crashing. Your own, internal sources, will help you fly.
Fortunately, there are loads of tools that can help us with that internal learning process. Relax.


Creating the right situation for learning from your own mistakes
Before we can learn, we need material to work with. When learning from ourselves, we need to create the material by ourselves as well in an objective, structured and unbiased manner. This can be done and is absolutely essential. Sportsmen take videos of themselves while exercising. Traders have to do it a little bit differently – we said it before: keep a professional Edgewonk Trading Journal. Trading alone will get you nowhere. Reviewing, adjusting and planning will make you profitable eventually. Edgewonk will help you out tremendously with that.

Additionally to tracking every detail about your trades, not only will it help you prevent biases, but it will also force you to think about your trading strategy. Because recording your trades goes way beyond “Winner/Loser” and requires that you have a sound understanding of your strategy. Suddenly it will all fall into place.


Applying your learning style to Edgewonk
Now, after recording all your trades and creating a database (which already was active participation by the way and will help you to remember a lot more about your trading than if you would simply take one trade after another without any review) you need to learn from it, of course. To learn from individual trades, stick to your learning style.

First write down the lesson to be learned. Then create a screenshot with annotations of that trade and save it accordingly to your Edgewonk trade ID. If you are a visual learner, this should suffice. If you are an auditory learner, create an audio file where you speak out what you did right and wrong with that trade, and save it together with the screenshot. If you are a tactile learner, I recommend you draw a rough chart of that trade with pen and paper and save it together with your screenshot (take a photo).

For me, even though I am a visual learner, I find that using pen and paper when writing and/or drawing will make the knowledge stick much easier than when I write down something through the keyboard on my computer, by the way.


Learning by crunching numbers
So that’s how to learn from individual trades, how to learn from metrics regarding your whole strategy? If Edgewonk tells you that you are closing out way too many trades too early when in profit, write it down, create an audio file, or draw a chart of a trade where you closed out too early. You will remember in no time what your mistakes are and can adjust your strategy accordingly. It’s that simple really, all it takes is a little bit of concerted effort.


Priming your brain for trading
Before putting on any trade, I recommend reviewing at least 10-20 old trades of the same kind, plus your current “change log” (the mistakes you made in the last few sessions) to get into the swing of things and get the brain into the right mindset. That way you will have a much easier time of recognizing profitable patterns, avoiding mistakes and moving forward. Because that is what trading is about after all: recognizing patterns that repeat themselves over and over again in one way, shape or form, and then compounding on them again and again and again. You will only be able to do this if you remember what worked and what didn’t in the past. Know your learning style, know yourself, know your mistakes and you will make it much faster.

Have a great trading week!
Moritz

Hi traders, ever wondered whether an alternative TP/SL strategy would have performed better for your entries? Look no further, Edgewonk will help you out with that too.

How To Use The Alternative Strategies In Edgewonk

Today we are talking about another very powerful feature of the Edgewonk Trading Journal: the Alternative Strategies.
How often have you asked yourself how a trailing stop, using a more flexible stop loss method or a different stake profit strategy would perform for you?

With the help of the Edgewonk Alternative Strategies you can evaluate the performance of different stop loss and take profit strategies, while not having to go through the extra effort of opening a second account and duplicating all your trades.

You can just execute your trades as usual and then write down the potential outcome of a different approach. Edgewonk will then exactly tell you what the best approach is for you.

This is basically how you would use the Alternative strategies in Edgewonk:

1) Follow your usual strategy and write down all the parameters in your Edgewonk trading journal

2) Then go to the Alternative Strategy section on the right of the Journal tab and select one of the four Alternative Strategies. In the first column, select whether the trade would have been a winner or a loser using a different take profit or stop loss approach. In the second column, write down how much you would have won, or lost in that particular trade following the other strategy.



3) Go to the Comments tab of your Edgewonk journal and compare the performance of the alternative strategy with your current overall performance. If you can see a major difference and an improvement, you should consider setting up a new trading strategy in Edgewonk and testing the alternative strategy as a separate setup.



The % sign shows the performance of the alternative strategy. If the background of the cell is red, it means that the performance of that particular alternative strategy is smaller than your overall performance (shown as “Own Performance” on the right).

Tip: Get creative with Edgewonk – tracking commissions
One of our customers reported that he is using one Alternative Strategy section to track his performance without commissions. So, for every trade he enters in his Edgewonk journal he subtracts the commission he paid and writes down that value in an alternative strategy section. This way he can see exactly how much he is paying for commissions over time and how much performance he is losing through commissions.

This is just one of many examples of how our customers keep surprising us through the ways they use their Edgewonk. What is your story? Let us know, we want to hear it.

Enjoy improving!
Moritz

Good evening, traders, or good morning, wherever you are..
today we will let you know the difference between a trading journal and a trading diary an how the combination of both can be very fruitful for your trading.

Understanding The Differences Between A Diary And A Trading Journal

Every week we find new articles that stress the importance of having a trading journal and we are always happy to see that the importance of keeping a trading journal is widely known among traders. But, when it comes to journaling or writing a trading diary, there are many forms and types and the differences can be huge. In this article, we want to explain the differences between the two types of trading journals and diaries, their purposes and what to be aware of when keeping a trading journal.


#1 The emotional text form diary

Although traders often use the name journal to describe this type of writing, it is really a diary in its core. Here, traders write down their feelings, thoughts, what went wrong, what they did wrong and what they did well and what they think they should do differently next time. Traders who keep such a journal either use physical notes and pen and paper, or use software like Word or Evernote to organize their thoughts.

In a recent article, published on Forbes.com, Dr. Brett Steenbarger wrote the following about trading journals:

Medical patients report a decrease in their symptoms when they write about their stresses–and especially when their writing enables them to take a fresh perspective on those challenges.[…]
Alternatively, when I have directed managers to keep solution-focused journals, describing what they did well, how they did things well, and how they could learn from their successes, the managers were: a) more likely to sustain journaling and b) more likely to find writing to be empowering and helpful.

These findings imply that a written trading diary can help you deal with stress, emotional pain and otherpsychological problems more effectively. Furthermore, a solution-focused journal may help build confidence and trust in a trading method.


#2 The analytical trading journal

This second type of trading journals is in sharp contrast to the previously described form and it is the category where the Edgewonk trading journal fits in. Firstly, we are quoting Dr. Brett Steenbarger again from his Forbes article:

Conversely, the journals of the most successful money managers served learning functions. The journal entries specifically analyzed what had happened in the recent past, but then went further to frame goals for going forward. It struck me that these successful journals had actually become platforms for deliberate practice: evaluating experience, making corrective efforts, and re-evaluating performance after those efforts.

In the analytical trading journal, the trader enters data about his trade such as entry, stop loss, take profit price and exit price. However, to generate a “platform for deliberate practice” and allowing the trader to make “corrective efforts and re-evaluating performance”, the analytical Edgewonk trading journal uses sophisticated and proprietary algorithms that crunch trade and performance data in a unique way.

The purpose of the analytical trading journal is to minimize the time and effort a trader needs for entering data, while providing very specific and executable insights about how to tweak trade parameters in order to increase performance. It goes even further – by analyzing trade behavior, finding patterns in your trading and evaluating every possible aspect of what a trader does, it is possible to identify exactly what is working to improve in these fields and avoid or tweak the things that aren’t working.

Additionally, traders who keep a trading journal that requires manual input find that it helps them to build discipline during their trading sessions because they know that they have to revisit their trades later when transferring them in their journal and adding another trade where they broke their rules becomes a very painful task and reveals an amateurish trading approach.


Getting the best of both worlds

In order to improve as a trader, you should make use of all available channels and use everything that could help your development. Therefore, in addition to keeping an analytical Edgewonk trading journal, it may be helpful to start having a solution-focused diary. However, we believe that writing essays about your trades do not provide value because traders will not revisit these notes ever again and they will just we cramped into your drawer.

We suggest you just start writing very short notes and thoughts that can serve as reminders later. Furthermore, identify the five things that you do best in your trading and the five things and mistakes that you make repeatedly, write them on post-it notes or a piece of paper and hang them next to your trading desk as a reminder. Together with the power of the Edgewonk trading journal, you are now equipped with the greatest set of tools.



Enjoy the rest of the week!
Moritz

Hi traders,
if we want to win in this business we first have to accept that we will lose. As simple as it sounds, this is one of the hardest things for all of us when we start out trading. Most can never accept the fact and will thus stay losers forever.


There Is No Perfection In Trading

Inspired by this recently released brilliant StockTwits podcast with Peter L. Brandt, today we are presenting you an article that will shed some light on how far you should actually take your perfectionism in trading.

To make it short and painful: there is no perfect trading strategy. You will have to deal with losses. Yes, there are HFT outfits that have been posting winning day after winning day for the last 5 years, but let me tell you a secret: you are not a HFT outfit. Plus, even if such strategies should exist, the chances of coming across one of those during your lifetime would be extremely small.

So stop hoping, and start accepting the fact that you will lose. A perfect trading system is one that makes money in the long run, not a system that makes money with every trade that is utopia.


Curve Fitting Is Asking For Disaster

If, even after your trading system has proven to be profitable, you still want to improve it, you have to be very careful. A trading system is a very delicate construct and whenever you change a parameter, your winrate and reward:risk ratio will change. So will your variance, average drawdowns, average updraws, and so on.

Changes to a trading system should be subtle and step by step, based on robust data. If you constantly try to perfect your performance, you will eventually end up curve fitting. This means that your strategy will be way too closely aligned to the past which leaves absolutely no room for any changes in market behavior in the future. But as we all know, markets are breathing and constantly evolving.

Fitting a system too tight around past data will cost you a lot of money the very real dilemma of every backtest.


At One Point You Have To Decide Where You Stand As A Trader And Expect To Lose

You may already have a profitable trading system in your hands, you just dont know it because after every losing trade you want to adjust so that the loss you just took could have been avoided. However, this means changing your system and opening it up to other potential losses.

At one point you simply have to accept that your trading system will lose trades, it is the nature of trading. In Poker, no one would ever even consider the idea of trying to win every hand he plays; its a ridiculous thought and absolutely insane.

"Most traders take a good system and destroy it by trying to make it into a perfect system." Robert Prechter

Accept that this is you, that this is your trading system, with all its benefits and flaws. Learn to love it and accept that losses are a part of it. Know that you have a positive expectancy and that the system makes money for you what more do you want? You are already better than approximately 95% of the people that ever set foot in this business.


You Have To Strive For Excellence, Not Perfection

If you cannot fulfil your dream of creating the perfect trading system, what is left? Excellence! It is your job to make sure to follow your system 100%. Not even the slightest deviation is allowed. Make sure you are always trading at the peak of your performance. Strive for excellence and make every trade count!

Every trade that you take outside of your trading system is an insult to yourself, to the time and effort you put into trading, and to your self-respect.

Excellence really comes down to respecting yourself in the end. Once you come to respect yourself and trust your abilities and your system, it will become easier and easier for you to follow your system.

If you encounter a losing streak, research whether you executed all the trades flawlessly and if yes, did the market conditions change, or did anything else happen? During losing streaks it is essential to stay on course and follow your system, but at the same time understand why you are losing. If there is nothing to be done, good. This describes the process-oriented mindset which we discussed earlier.

Take the losing streak with pride, protect your capital, execute every trade with excellence and you will weather the storm.


Instead Of Optimizing One Setup, Simply Master Another Setup Or Market

Its fairly simple, really: Once you followed your system for a while (lets say 50 trades) with the utmost excellence and you are still losing money, you can say with very high certainty that the system is the problem. You can then adjust, but you will never know if your system is a winning or losing one if you dont follow it in the first place. Thats what demo accounts and backtests are for.

And trust me, the more emphasis you put on thoroughly following your system, the faster you will develop it into a winning system that fits your lifestyle and personality, which is incredibly important.

However, if suddenly you are winning over a sample of 50 trades wow. This could be it! You may have a winning system. Why change it now? You are making money. Trade the system until you can do it blindly, day in, day out and execute with excellence. If your Edgewonk trading journal tells you that there is a LOT of potential in a certain area go for it. Test the adjusted system on demo first, of course. However, if you are profitable and cant find any huge leaks in Edgewonk, leave it as it is. Again, do not curve fit.

If you get bored, thats great! The hallmark of excellent trading is monotony. You have mastered your setup, congratulations. You can now, in order to smooth your equity curve and diversify your income streams, develop another setup following the same process.

Over time you may learn 3-5 setups to find trades in every market condition and your equity curve will look almost perfect, although there will still be a lot of losers among your winners!

"Multiple systems, traded over a wide variety of markets are necessary to smooth out the equity curve." Joe DiNapoli


Conclusion: Never Change A Running System

What definitely holds true in the world of bits and bytes also holds true in the world of trading. Once you make it, be happy with it. Do not question your system, ever, unless you consistently start losing money. Curiosity killed the cat.

With Edgewonk it is very easy for you to test alternative strategies, see where you are leaking money, find out in which areas to improve, and so on. It will also help you tremendously in executing your trades with excellence and building discipline with the immediate response features, such as the Tilt-meter.

Edgewonk, if you manage to follow your plan, will help you to turn a losing system into a winning system and it will help you keep a winning system just the way it is winning. Dont be greedy, dont be a perfectionist. Be an excellent trader that knows that losing is part of the game.


Thank you for your time,
Moritz

If you haven't done so yet, go check out our free tools. They are easy to use and will help you understand yourself, your own strategy, and turn your trading into a business. No reason not to take a look!

Strategy Profitability Check
Trading Income Calculator
Losing Streak Analysis
Position Size Calculator
Trading Plan
Emotions Cheat Sheet
Screenshot & Charting Widget

As always, enjoy.
Moritz

It's not all about the entries. Exits make and break you as a trader, believe it or not, but, unfortunately most traders never spend ANY time on planning their exits. Read on to understand how Edgewonk will help you to optimize both your entries as well as your exits.

How To Improve Your Trade Entry, Stop Loss And Take Profit Strategy

Have you ever wondered how your stop loss and take profit placement impact your performance and how to change your stop loss and take profit strategy to improve your performance? Most traders arbitrarily change their stop and profit setting solely based on what they believe is the best thing to do. We at Edgewonk are aware of this problem and that’s why we included the Updraw/Drawdown statistics in our trading journal to provide actionable and precise information about how to improve your stop loss and take profit placement.

With the help of the Updraw and Drawdown analytics, you can see exactly whether you should enter your trades a bit later or set your stops closer to the entry to improve your reward:risk ratio, set your take profits order close to the entry to avoid giving back profits, or use wider take profit orders to capture greater market swings. In the following article, we will walk you through the process of how to use these statistics in the most efficient way.

How to enter Max Profit / Max Loss?
When you enter a trade, you will come to the section “Maximum Profit / Maximum Loss”. Here, you simply enter the highest and lowest price you observed during the duration of your trade. These statistics will unlock a powerful Edgewonk feature as we will see shortly. But first, we want to show you how to enter trades with the correct parameters into your Edgewonk trading journal.

Trade 1 – Buy trade | Outcome: stop loss hit
After buying at 1.1100, price moved higher to 1.1200 which marks the highest price during the duration of the trade. Then, it moved against the trader, hit his stop loss at 1.1000 and kept going lower.

Whereas the highest price is very straight forward, there are two ways to enter the lowest price in this example. The standard approach would be to choose the price of the stop loss order. The alternative method, which is a bit more subjective, but may also provide greater insights, is to look for the overall lowest price, in our case at 1.0830.




Trade 2 – Buy order | Outcome: take profit hit
Here, we bought at 1.0900 and price first moved against us and the lowest price was found at 1.0830. Afterwards, price moved in our favor and first hit our take profit order and then moved even further.

Similarly to the previous example, there are two ways to go about the highest price. The standard approach would be to use the level of the take profit order at 1.1100. The more subjective approach would be to look for the highest high after the trade was closed, which in our case is 1.1370.




The analytics – Using Updraw/Drawdown to tweak your strategy
After you have entered some trades, Edgewonk shows you the “Updraw” and “Drawdown” statistics in the different analytic sheets. The Updraw/Drawdown statistics can be used to gain insights about your take profit and stop loss placement and to identify ways how you can improve your order setting approach.
The screenshot below shows the Edgewonk Performance Tables. The arrows point to the location of the Updraw and Drawdown columns.




The Updraw/Drawdown % values always refer to your TP/SL Planned value.
Now, let’s take a look at how to interpret the numbers:

Interpreting Drawdown
The drawdown describes how much price moved against you.

1. High drawdown: Price comes very close to your stop loss order.
   Tip: You probably enter your trades too early. You may enter your trades a bit later to avoid the large drawdown and to increase your reward:risk ratio.

1. Low drawdown: You set your stop loss order too far away and price does not even come close.
   Tip: Set your stop loss closer to your entry to increase the reward:risk ratio.

1. Drawdown 100% = Price reached your stop loss order.
2. Drawdown > 100% = Price reached your stop loss order and kept moving afterwards.

Interpreting Updraw
The updraw value indicates how much price moves in your favor.

1. High Updraw: Price moves close to your take profit order.
   Tip: A high updraw value (but smaller than 100%) illustrates that price moves close to your take profit order, but turns ahead of your target. You may set your take profit order a little closer to your entry to avoid giving back profits.

1. Low Updraw: A low updraw means that after your entry, price does not move much in your favor and turns against you quickly.
   Tip: Avoiding such trades where price does not move much in your favor can help you stay out of unprofitable trades.

1. Updraw 100% = Price reached your take profit order.
2. Drawdown > 100% = Price reached your take profit order and moved further into the direction of your trade.
   Tip: If you see an Updraw of greater than 100%, you may set your take profit orders further away to capture greater price movements.

Additional tips to improve your way of tracking performance
In another article we showed you how volatility differs during uptrends and downtrends. Varying volatility will also impact how the updraw and drawdown values manifest in your trading and how stop loss orders and take profit orders should be placed. Therefore, creating a Custom Statistic to capture trend direction and combining it with the Updraw/Drawdown statistics in your analysis can reveal more insights about how to improve your trading strategy for different market conditions.

Read more – why you should track trend direction

As always, thank you for your time and trade safe: NFP is around the corner.
Moritz

Hi traders,

recently we launched our 12-week advanced journaling & trader development program. It is the perfect add-on to the Edgewonk trading journal and will structure your trading in professional and efficient way. During the 3 months you will learn, among others:

1. Master the basic and advanced Edgewonk features and techniques
2. Identify and understand your trading mistakes to overcome your challenges and to develop your trading edge
3. Make big improvements with our weekly assignments and tasks to improve your performance and become a better trader
4. Get direct feedback from the Edgewonk team and receive tips and advice about how to use Edgewonk effectively and how to evolve as a trader

As you can see, you will also get direct feedback from the creators of Edgewonk, professional full-time traders. All in all it's a steal for the value and we highly recommend you check it out. Follow the link below to see in detail what awaits you during the 12 weeks.

http://www.edgewonk.com/advanced-tra...urnal-program/

Moritz

Hi traders,

we hope you had a successful week and dodged all the bullets while making some money. If you are still struggling to make it in this game, we recommend our free ebook "The 7 Steps To Entering The Perfect Trade".

Simply click here to get it.

We are sure you will like it and most definitely it will improve your trading more than a bit.

Have fun reading it over the weekend!

Moritz