Trading Tip: Treat Your Trading as a Business: Keep a Ledger.
Those who have followed me know how I feel about treating trading as a business and not a casino. If you treat it like a casino you will wind up like most of those who visit Las Vegas. If you treat it like a business then you have a chance to be successful.
Treat your trading as a business
• Keep a record of all your trades and review the results on a weekly or monthly basis.
• Calculate the average amount you make on your winning trades and compare it to the average amount you lose on your losing trades.
• Note the % of winners to losers.
• If you have a positive winning percentage (i.e. greater than 50/50), then all you need to do is make more when right then wrong to be profitable.
• If you have a negative winning percentage (i.e. less than 50/50) you need to have a larger average gain vs. average loss to be profitable.
• Keep an eye on your maximum drawdown as you are trading with limited capital
• Keep tabs on your longest losing streak for the same reason, you are trading with limited capital
• Analyze each currency and/or other instrument (e,g, stocks, gold, etc) results separately.
• Like any business, identify the areas that are profitable and those that are either losing money or are less profitable. For example, if you are consistently making money trading GBPUSD but losing in USDJPY, then consider stopping trading the latter and focusing efforts on the former. It would be like a business shutting down a losing division,
By keeping a ledger and analyzing your trading results, you will be able to see whether your performance is creating a viable business. If it doesn’t, then re-evaluate your approach and see what you can do to produce a winning strategy.
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Trading Tip: Treat Your Trading as a Business: Keep a Ledger.
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