You probably know that you can’t win all your trades. But understanding that a winrate of 100% isn’t achievable and knowing how to effectively deal with losses are two very different things.

A baseball player who strikes 30% of the time is considered world class. In trading, traders go broke with winrates as high as 50%. A winrate of 50% should be more than enough for any trader to achieve all the success he is after. However, not knowing how to deal with losses is what breaks traders and a main reason why traders struggle so much.

The following 9 tips help you deal with losses in a much better way.

1 – Avoid over-analysis

There are just two types of losing trades:

• The ones where you failed – breaking rules, undisciplined trading, emotional trading, wrong risk management
• The ones where markets failed – even the best pattern will fail often. It’s just how trading works

Don’t try to overcomplicate things. The first step is always to categorize your trade and see if it was your own fault or if you did everything correctly.

Avoid using new indicators or other trading tools to find out if a loss could have been avoided. Only evaluate your trade based on your own system and analysis.

2 – Audit your trade

In Edgewonk, you assign tags for your entry, exit and trade management to individual trades and you can also grade your trades by quality. If you see that your comments are mostly negative and that it causes your Tiltmeter to rise, analyze what happened exactly. Why did you make the mistake? What caused your negative trading behavior?

If you assign positive comments that show discipline and good trading behavior, your Tiltmeter will grow positive. You can be proud of yourself for sticking to the plan and executing your trade correctly.

This approach shows the difference between a process-oriented trader and a results-oriented trader.

3 – Analyze your risk

Did you use reasonable position sizing and money management? Did you place your stop at a price level that makes sense? Did you widen your stop loss when price moved against you and you became scared? Did you take profits too early without seeing actual exit signals?

Risk is an important aspect in trading. It’s not only about choosing how many contracts to buy/sell, but also how you manage your trade and your positions overall. Too often, traders fail because they manage their trades incorrectly, driven by emotions.

4 – Accept randomness

We have said it in the beginning: either the markets just did not react as you anticipated and the loss could not have been avoided, or you made a mistake and the loss was your fault.

However, don’t try to justify a bad trade. Be honest and take responsibility. A trader who lacks self-awareness and does not accept responsibility robs himself of the ability to grow.

5 – Believe in yourself

Don’t beat yourself up after a loss. Do you think that the professional athletes you see on TV always start doubting their whole game after a loss? Do you think that the top business men go home and talk themselves down after making a bad decision?

You have to stay in control. Positive self-talk, as long as it is not delusionary, is very important and confidence is vital for a successful trader.

6 – Understand when you are wrong

Trying to force a losing trade to turn into a winner almost always ends in a disaster. You have to be able to close your trade for a loss and be completely indifferent about the outcome. Don’t widen your stop to “give it time to develop” or add to a loser because “you want to get out faster”.

It is seldom the regular losses that wipe out traders, but those few occasions when everything goes wrong.

7 – Stay courageous

After a loss, don’t lose your confidence. Not capitalizing on the next trading opportunity and missing potential profits can lead to even more emotional trading. Losing a trade, then missing the next profitable trade sets you up for failure; when you then jump on the next best trade that did not quite meet your criteria it, of course, almost always results to another loss.

Stay focused and always bring your A-game.

8 – Walk away from your trades

If you just can’t deal with losing, walk away from your computer. This technique is especially helpful for beginners. Getting a new perspective and coming back to your platform with a neutral view can often make a big difference.

9 – One trade doesn’t mean anything

The problem with 99% of traders is that they give one single trade way too much weight. Over the course of 5 – 10 years, one trade is meaningless. You will probably take thousands of trades over that period of time. Why do you allow one trade to wipe out your account or turn into a loss that will take you weeks to recover from?

Imagine Messi would put so much emphasize on one shot that his whole career depended on it. Do you think Apple would put their whole reputation and decades of hard work on the line for just one product? Trading is risky, but you have to take calculated risks and know how to deal when things don’t work out.

Create a Custom Statistic

If you want to know more about your psychology, we suggest you set up a Custom Statistic in your Edgewonk trading journal like the one below. It will provide insights into your trading that can’t be measured in any other way.

If you are not a profitably consistent trader by now, ditch all your strategies. Immediately. We see it in our work with traders almost every day; traders try to trade several strategies simultaneously while consistently losing with every single one.

What’s is it you are trying to accomplish by trading different strategies at once? Are you just looking for more trading opportunities? Do you think that by testing multiple strategies, you are more likely to find one that works? Or are you trying to smooth your equity graph by trading complimentary strategies for different market types? Whatever it is, you have to stop today.

The jack of all trades and the master of none

This is what usually always happens when a trader trades multiple strategies at once. It never leads to better trading and it always leads to more losses. Most traders completely lose their focus and their edge once taking on too many things.

Have you ever seen a professional soccer player playing in the NBA and the NFL at the same time? How many doctors do you know that are also tax consultants? And what would you say if NIKE would suddenly venture out and start a car manufacturing business? Of course, you’d say that no one can be successful at two fields. And you are right. But does that really apply to trading?

A trading strategy is so much more then what you think it is

It’s clear that a sports apparel company is very different from a car manufacturing company. And you also need a very different skillset to be a doctor or a tax expert. But, in trading, you only need to buy and sell – regardless of the strategy. Right?

This is where most people go wrong. A trading strategy is not just a set of instructions and a blueprint that you have to follow. A trading strategy is a complex construct and professional trading requires a unique skillset.

You have to stop believing that a trading system is only a set of entry criteria triggers. A good trading system consists of a thought out position sizing strategy that minimizes drawdowns and maximizes account growth; a reasonable and repeatable approach to stop loss placement that protects your capital while also maximizing your reward:risk; a take profit strategy that allows you to maximize winners while avoiding premature trade exits; a trade management approach that helps you protect unrealized profits and deal with fluctuating markets; and you need a strategy that helps you deal with, and adapt to, changing market conditions.

Each strategy requires a very different approach and all other trading parameters have to change when a strategy changes.

You don’t lose because of bad entry criteria

Although it sounds contrarian, it’s true: traders typically don’t lose because of bad entry criteria, but because they mess up everything else. Here are just 10 ways why traders lose – and bad entry criteria is not among them:

1) Undisciplined trading. Premature decisions and impulsive behavior

2) Stops are too close and don’t leave enough room for price to develop – misinterpreting market conditions

3) Stops are too far and reduce the reward:risk and the expectancy – misinterpreting market conditions

4) You let one regular loss turn into a big loss where it takes multiple trades to recover from

5) You risked too little and did not capitalize on the profit opportunity

6) You risked too much and lost an unnecessary large amount on a single trade

7) You managed your trade inefficiently

8) You exited too early and missed out profits

9) You missed a trade because you were still insecure after the last loss

10) You listened to someone else’s opinion

If you are honest, those reasons are responsible for probably 90% of all your trading losses. And it’s almost never a set of wrong entry criteria.

It is true that picking bottoms and tops, predicting instead of anticipating price behavior are also major problems, but such bad trading behavior is caused by a complete misunderstanding of market behavior, rather than a wrong set of entry criteria. And, consequently, traders who operate from a predicting mindset will almost always struggle with the 10 previously mentioned problems as well.

So, what does that mean for traders?

Your way out – Razor focus

If you really want to take your trading to the next level in 2016, stop changing systems and work on everything else. It will be hard and you will be tempted to look for alternative systems, but you won’t be able to escape the fundamental problems every trader has to deal with. You can’t run a successful business, if you screw up the basics of accounting, profit margin calculations and inventory management. You can’t become a professional basketball player if you don’t know how to dribble and throw a good pass.

Trading multiple systems will only make your problems worse because it takes your focus away and instead of working on the core skills a trader needs, you are just looking to get more signals while neglecting all other trading principles.

If you need assistance and are wondering how to do all that on your own, take  a look at our 12-week course bundle where you get our Edgewonk trading journal and step by step instructions on how to turn things around for you.

Did you know that you can track as many different trading accounts with just one Edgewonk version? If you have multiple accounts across different brokers or simply want to track demo and live trading account separately, Edgewonk helps you do that easily.

Step 1: Create a new journal

First simply start tracking your trades in Edgewonk normal. When you save your Edgewonk journal you are asked to give it a name and Edgewonk will then create a new .xlsc (secure Excel file) where all your trading data is stored.

Do not try to open the secure Excel files. Windows can’t read the data. Always open the regular Edgewonk application – the file with the robot head.

Step 2: Create another journal

When you open Edgewonk the next time, you are given three choices:

1) Original Workbook – this will open a brand new Edgewonk journal

2) Last Save – this will open Edgewonk where you have left  off previosuly

3) Choose Save – Here you can choose a specific Edgewonk journal

If you want to start tracking trades for a new account, choose the first option and start a new Edgewonk journal. Again, when you want to save your journal, you have to give it a name and Edgewonk will create another .xlsc file for the second account.

When you go back to your Edgewonk folder, you can now see that there are two .xlsc files for your different trading accounts.

Step 3: Switch between journals

Now when you open Edgewonk, you should use the “Choose Save” option. An explorer window will open and you can choose between your different Edgewonk trading journal files.

And that’s basically it. Keep in mind, don’t try to open the .xlcs files – they are just encrypted data files. Always open the Edgewonk application with the robit head.

Bonus: Edgewonk in the cloud

You can access your Edgewonk data from different computers. Simply store the .xlsc files (not the Edgewonk application) in your cloud drive (DropBox or OneDrive), install Edgewonk on your different machines and then you can access your .xlsc files from everywhere.

In a perfect world, we all would be making optimal trading decisions all the time and if we still ended up with a losing trade when a setup failed, we would just shake it off and wait for the next signal unfazed. Of course, that’s not what usually happens.

Influenced by past results

After a loss, traders often get too scared and reduce their position size because they don’t want to lose more, or they increase their size because they want to catch up and recover from the loss faster. Losing confidence, entering trades too late, chasing price, mismanaging trades or completely abandoning all trading rules is also common behavior after a loss.

Especially when starting the trading day or week with a losing trade, some traders are completely caught off guard and then act from a reactionary state of mind instead of being in control and trading their trading plan.

You can see the same effect after winning trades. Traders get over-confident, they increase their size because they feel great and invincible and they take random trades because they think they can “feel” what is happening next.

Implementing a Custom Statistic

To find out how your performance is being influenced by your past trades, you can use a Custom Statistic in Edgewonk and add the following parameters:

The first four Custom Statistics (marked in blue) are more general and ideal for the trader who just wants to get a feeling for how his past trades influence his current decisions.

The last five Custom Statistics offer more in-depth insights into your performance for those that aspire a much deeper level of understanding. Those Custom Statistics will show you quickly how you can handle emotional pressure and how your past performance is influencing your current trading decisions. Then, after discovering your weaknesses and when you make the best/worst trading decisions, you can proactively control the situation when you find yourself in a scenario where you don’t have an edge.

You can also take at an earlier article where we compiled a list with 11 examples of Custom Statistics some of our users send us.

Tip: It is recommended to check your Tiltmeter and your past trading behavior on a daily and weekly basis. Simply review your most recent Tiltmeter development and evaluate the comments, tags and Custom Statistics you have assigned to your trades. If you see patterns and negative comments coming up repeatedly, write them down on a Post-It and put it next to your monitor as a constant reminder. This might sound odd, but you’ll see the impact it will have quickly.

High performers call it “Evidence-Based Practice” or the TFAAT (try, fail, analyze, adjust, try again) approach. This way of improving and developing skills makes succeeding an almost certainty while following the “Hit and miss” approach leads to failure 99% of the time. In this article, we want to highlight the importance of this concept for traders and show how to apply it to your own trading.

Why traders fail – Hit and miss

Unfortunately, the hit and miss approach is how people usually approach their trading and it is obvious why the failure rate in trading is so high.

You start your computer in the morning, flip through a few charts, try to find an entry and if you can’t find anything, you go to a different market, try a new time frame or use a new indicator. Then, after you are done trading for the day, you close your trading platform and hope to find better trades tomorrow.

Traders who follow the hit and miss mindset usually change their system regularly, hop from market to market and do not have a systematic approach when it comes to analyzing charts and planning trades – let alone performance analysis.

Failure is the only possible outcome, although those traders believe that they are so close to finding “the right” system. Trading does not work this way. Expecting to become a professional and consistently profitable trader just by randomly clicking the mouse never works.

Success (almost) guaranteed – The evident-based approach

The reason why so few people follow the way trading should be is because it takes a lot of work and it requires constant effort. Professional trading, then, has nothing to do with hoping for success by clicking a mouse, but profitable trading becomes predictable and achievable.

Evidence-based training works in all areas where you need to develop skills – which is basically everywhere. It is not something we created out of thin air, but it is a proven way of achieving mastery. Let’s go through the 4 step process how anyone can improve and develop his skills:

1 – Try and fail

Trying means that you do the task. Naturally, your initial results will probably be rather disappointing and the most probable outcome for beginners is failure, besides the occasional beginner’s luck.

In trading especially, it is important to fail in a way that allows you to come back and keep on trading. Your initial risk should be small and implementing capital protection rules is essential to survive this first phase.

2- Analyze

If you have made it to his phase, you are already ahead of 90% of all traders who will be stuck in the Try-Fail-Loop forever – or at least until they quit.

It is surprising how few people actually look for answers to their failures; most traders never stop losing and never change their approach. And no, just changing your trading system is not good enough here.

Insanity: doing the same thing over and over again and expecting different results. – Albert Einstein

Although we are a little biased, we see it every day when interacting with our users, keeping a trading journal is the only way to get adequate feedback about your performance. Analyzing your past trading performance has to be much more than just checking whether your account balance goes up or down. Here are 7 things to look for when analyzing your performance:

• Am I making impulsive and emotionally driven mistakes? When do I make most of my mistakes?
• How well do I respect my rules and when do I violate them most? How much money does it actually cost me?
• Under which market conditions does my method perform best/worst?
• Do I make trade management mistakes? If so, what causes my mistakes exactly?
• Is my order placement effective and is there room for improvement?
• Which time frame provides the best results and when should I not trade?
• What or other factors that influence my performance? And when do they interfere with my trading?

Most traders will never ask themselves those questions and even fewer will try to find answers. Broker statements won’t provide answers either. Manual journaling can be a tedious and time-consuming task, but there is no other way to find answers to the questions that will turn you into a professional trader. An effective feedback loop is critical for making improvements.

3 – Adjust

After you have identified your weaknesses and strengths, you need to adjust your approach. The majority of traders believes that adjusting means looking for a new trading strategy, but “system-hopping” has never made any trader profitable; it is a mental shortcut for the lazy ones.

The serious trader enjoys the learning process and each time he finds a performance “leak” he makes a small adjustment to his trading. However, the trader seeking professionalism avoids major changes to his methodology so that he can evaluate the exact impact of his adjustments effectively.

4 – Try again

After going through the analysis and adjustment loop, you can go back to your trading and apply what you have learned. You’ll probably have to repeat this cycle many times, but each time you feel more confident in your skills and your approach. You move away from the general gambling mentality and take full control over your journey, actively improving your skills and slowly moving towards your goals.

Becoming a better trader does not have to be a frustrating and impossible endeavor. We understand that in every other area of our lives it is important to analyze how we perform to get meaningful feedback and then be able to make necessary adjustments to improve. Why do so many people fail to see the connection when it comes to trading?

“It took me a lifetime.” – Pablo Picasso

“If people knew how hard I had to work to gain my mastery, it would not seem so wonderful at all.” – Michelangelo Buonarroti

“My overnight success was really 15 years in the making. I’d been writing songs since I was 6 and playing in bands and performing since I was 14.” – Lisa Loeb

“An overnight success is ten years in the making.” – Tom Clancy,

“What separates Masters from others is often something surprisingly simple. Whenever we learn a skill, we frequently reach a point of frustration – what we are learning seems beyond our capabilities. Giving in to these feelings, we unconsciously quit on ourselves before we actually give up.” – Robert Greene

How do you typically end your trading week? Do you just close your trading platform and spend the night in a bar or on your couch watching movies? If this describes your post trading routine, there is lots of room for improvement which can help your performance immediately. The right Friday post-trading analysis can make a huge difference in your trading and not doing it will almost certainly keep you from achieving consistency.

Here is our 8 points checklist to improve your weekly trading review, thus, your performance.

1) Did you meet your weekly, non-monetary trading goals? Did you make progress?

It is important to not get hung up on short term monetary goals. Forcing weekly returns almost always leads to underperformance. Non-monetary goals typically include avoiding bad habits and following your rules. In our 12 week program we encourage traders to identify their greatest weaknesses and then work at them one at a time.

2)What setup and/or instrument performed best for you? And why is that?

What do your winners have in common? Are market conditions favoring your strategy or did you make any changes that lead to greater profits? Try to find what works best and then do more of it.

3) What cost you the most money this week? How can you turn it around?

Were your losses caused by bad trading or did you not listen to what the market told you? Identifying performance killers is a big step towards profitable trading.

4) Did you spend enough time away from your charts working on your trading (e.g. preparation, journaling, review, etc.)?

The myth of screen-time is misleading traders. You don’t become a better trader by staring at charts all day long, but only actively working on your skills and reviewing your performance. How do you spend your time? Do you leave enough room for improvement?

5) Would you say that are you are serious enough about trading?

Trading is a serious business where effort and discipline are rewarded. The typical approach of the average trader does not reflect this. Hunting signals, changing methods and trying new indicators constantly is as far away from profitable trading as it gets.

6) Do you follow your plan and rules consistently?

If you are an Edgewonk user, your Tiltmeter will answer this question. We set the Tiltmeter challenge at the start of your 12 week program for a reason. The Tiltmeter is the ultimate goal to build discipline.

7) Are you adhering to sound risk management principles?

Often, traders can remain disciplined for a long period of time and then lose all their profits on just one trade. Wrong risk management and not adhering to your stop loss can easily wipe out a large portion of your account. Make sure that no single trade can have a meaningful impact.

8) Did you journal all your trades?

Journaling requires manual effort and it can seem like a tedious task to enter your trade data. However, there is no replacement for it and our users report that they see a positive influence on their trading after a few weeks already. This brings us back to question 5: are you serious about this? Do you want to create long-lasting success as a trader or do you try to find the quick fix?

Your Friday routine for better trading

Set aside 60 – 90 minutes before you start your weekend and answer those questions honestly. There is no point in sugarcoating failure and a lack of discipline – it will just keep you from making progress. Although it might sound harsh, in the end nobody but you cares about your trading success and you owe it to yourself to use the time and effort you put into trading in the most effective way.

We developed Edgewonk so that it is the ultimate tool that will hold you accountable and, at the same time, provide the most honest view on your performance. It will help you stay objective and set you up for success.

We are excited to release Edgewonk 1.7 today. We made a handful of improvements, added one complete new feature and improved usability. The list below shows you what is new:

[New feature] Sessions sheet

With Edgewonk 1.7, we are introducing the Sessions sheet. The Sessions feature is the newest addition to Edgewonk’s trader development toolkit and it allows traders to take their trade review and feedback process to the next level.

In the Sessions sheet, you can analyze individual trading sessions, set different period parameters, write down personal notes, write down the lessons you learned or have yet to learn, classify your sessions and session lessons by category and also get a brief performance overview.

The Session feature allows traders to grapple with their trading and their trading behavior in a much deeper and intense way.

>> Watch our video on how to use the Sessions sheet <<

2 new slots for Custom Statistics

The Custom Statistics are among the most popular Edgewonk features and many of our existing users have asked for additional slots for quite some time. With Edgewonk 1.7 we now added two new slots and it’s now possible to track 8 different Custom Statistics in your trading journal.

Equity graph – commission line

Another popular user request was additional commission analytics. With Edgewonk 1.7 we now added a second line graph to the equity curve feature which shows your potential performance without commissions and you can see how much commissions are impacting your performance.

Scroll helper

To make the data entry and review process more efficient, we added a scroll helper to the Journal area. On the far left, you can now see the date and the specific instrument of the trade while scrolling through your journal. And if you don’t want to see the scroll helper, just minimize the column with the buttons at the top.

We are currently planning and developing a completely new Edgewonk version which will be released in a couple of months (no fixed date yet). We are very excited about the things to come and we are equally happy to see how satisfied our existing users are with their Edgewonk trading journal.

If you have any suggestions for improvements or other feature requests, we would love to hear from you. We take user feedback seriously and are always looking for ways to make Edgewonk better.

PS: If you are an existing Edgewonk user, you can read here about how to move your data from 1.6 to the newest 1.7 in just 3 steps

Happy journaling,

Your Edgewonk team

The Edgewonk Sessions feature is the perfect synergy between statistics-based journaling and psychological journaling. The Sessions sheet helps traders make their journaling much more effective by offering a place that allows you to perform your daily, weekly or monthly review with one easy to handle feature.

Performance review – The professional feedback loop

At the end of each trading day (for day traders), week, month, or quarter you can come to your Sessions sheet and make a new entry, capture your thoughts, record your ideas and also write down the lessons that you have learned over the duration of the session.

One of the reasons why traders struggle and don’t achieve the level of success they are after is because they lack a professional and structured feedback loop. Most traders don’t record their trades, even fewer record what their trading has taught them and very few have a repeatable and organized way of keeping track of their trading. Not only the top traders, but most high-achievers are typically well organized and follow routines that allow them to develop superior skills and make constant improvements based on their observations.

Creating a new session takes a few minutes, at the most, but the insights you get over time are invaluable. You can keep track of your progress as a trader and you can come back to your sessions at the beginning of each trading day/week to remind yourself of where you are with your trading.

Creating a new session

Step 1: Choose the date and session duration

In the first column, you need to enter the starting date of your session. Every Friday or Saturday, you can come to the Sessions sheet, enter the previous Monday and select “Weekly” from the duration dropdown in the next column.

Step 2: Enter your personal observations and notes

Under “Notes”, you can type in general comments, things that described your session, and other personal thoughts you want to record.

Under “Lessons learned” you can write down the things that really stood out in your trading, mistakes that cost you the most money, new observations that you made and want to remember and general lessons about your trading.

The column “Note category” allows you to define the type of the lesson learned and organize your sessions in any other way. Under “Definitions” you can change the categories if you want to use your own.

The “Rate my sessions” column allows you to rate your session based on how satisfied you are with your trading.

Step 3: Performance statistics

The performance statistics update automatically based on the session start date and the duration you have chosen. Besides some general performance metrics, Edgewonk also shows you a range for the trade IDs of that session so that you can review individual trades much faster if necessary.

Performance review and emotional journaling

Edgewonk’s session feature pulls the plug on keeping lose paper stacks and allows traders to organize their trading in a structured way. Furthermore, by exposing yourself to your trading activity you gain a new level of self-awareness and are more likely to notice and avoid bad trading behavior and negative patterns.

Traders usually go through the same phases and take the same steps on their journey to, hopefully, becoming professional and consistently successful traders. We at Edgewonk know about the importance of focusing on the right things at the right time and we want to help you navigate through the complexity of trading.

In what follows we explain the different phases a trader goes through, show you what are the most important things to focus on at that time and which Edgewonk features to consult. We want to help you become more efficient when it comes to handling your Edgewonk trading journal while getting the most out of it.

The Beginner – set yourself up for success from the start

The failure rate of new traders is extremely high and research showed that only 80% of new traders survive the first 24 months in the markets.¹ So how can you increase the chances of survival while setting yourself up for a good start at the same time? There are 3 main points of focus on for the absolute beginning trader; if you have been trading for a while, you can safely skip to the advanced beginner below.

The right perspective and expectations. Unrealistic expectations typically demotivate traders very quickly and lead to a lot of frustration. Furthermore, high expectations often lead to a gambling mentality and flawed risk management.

Having realistic expectations is very important because it allows you to trade from a good mindset right from the start and it sets you up for long-term success.

Discipline. In our 12-week program, we put the Tiltmeter-challenge at the very beginning because we know about the importance of developing discipline early on.  The sooner you realize the importance of discipline, the more you can shorten your learning curve.

Routine. We also encourage our users to create a personalized trading routine at the very beginning of their 12-week journey with Edgewonk. Following a structured approach and being clear about your trading helps build confidence and eliminates a lot of uncertainties.

Advanced beginner – avoiding the most common mistakes

At this point, you probably think you know more than you actually do which can be a dangerous place to be in. However, the trader who can successfully navigate through this advanced beginner phase has a much higher chance of success.  The following principles should be the main focus for traders during this stage.

Self-awareness. Without a doubt, self-awareness is the most underrated quality in trading. Many get so caught up in their day to day trading that they are often not even aware of their mistakes and misbehavior.

A trading journal is the ultimate tool when it comes to gaining self-awareness. Your journal never lies and it shows you exactly how well you are performing and whether you are still repeating the same old mistakes. The Tiltmeter should become your best friend.

The importance of risk management. At this point, it is also time to abandon the typical system-hopping mindset. Typically, traders will start focusing more on the importance of reward:risk and how it affects performance and expectancy.

Big revelations usually come once traders understand that they don’t need big winners or a very high winrate. Did you know that a reward:risk ratio of 1.4 only requires a winrate of 42% to break even? This is usually the first major lightbulb that goes off once traders can validate their performance metrics with their trading journal.

>> Watch our video about the reward:risk ratio

Patience and being selective. The trader that understands the implications of the reward:risk ratio will soon realize that he only needs a few trades every week/month to achieve a good return. The problem of amateurs is that they overtrade too easily, hoping to catch big winning trades, whereas the advanced trader understands that this is not necessary; a few good trades often enable you to outperform most other traders easily.

The intermediate trader – from losing to break-even

The intermediate phase is usually where traders go from consistently losing to trading break even. It’s a balancing act and too often traders fall back into old, bad behavioral patterns because they don’t see progress fast enough. Here are a few things that can help you advance to the next phase:

Personalizing and customizing your method. At this point, traders have often tried and tested many different strategies and approaches. It’s important that you start building your very personal trading approach. Find what makes sense to you and tailor it around your strengths. Do you prefer trend-following, breakout trading or mean reversion? What are the concepts and tools you understand best? Declutter and optimize your strategy and your overall routine.

Stop micro managing. Identify your biggest challenges and what costs you the most money. Throughout our 12-week program we encourage traders several times to look at their performance and identify their greatest performance killers.

Don’t focus on the nitty gritty and avoid getting lost in the details when you could work on some bigger areas in your trading and make a real difference. Always follow the top-down approach when it comes to trader development.

Controlling account swings. Drawdowns usually lead to emotional problems which then reinforces the downward spiral. With Edgewonk and the built-in Performance Simulator you can analyze potential future outcomes and identify flaws in your money management. By adjusting position size, based on what Edgewonk shows you, and with the help of the risk of ruin, you gain much greater control over account swings.

The advanced trader – prepare yourself for long-term success

Although the advanced trader is not yet at the end of his journey and there is still a lot to learn, he has a much higher chance of long term success and is equipped with the right tools and knowledge to make it on his own. Here are a handful of things the advanced trader should focus on:

Self-improvement. This is a never-ending task and the better and more efficient you become, the more you’ll want to work on yourself. Edgewonk shows you exactly where you are losing the most and under which circumstances you are performing worst. Whether it’s risk management, entry or exit issues, trade management problems or emotional leaks, Edgewonk will find out.

Increasing performance. Once you have proven to yourself that you can trade profitably, you can look at ways to leverage your skills. This is usually done by adding new markets, fine-tuning your risk management, potentially increasing your reward:risk ratio or even being more selective to improve your winrate. Whatever it is you are focusing on, make sure to record it in your Edgewonk journal to back up your ideas and test your hypotheses.

Monitoring. An established feedback loop is of great importance because it adds structure, stability and certainty. The best traders have a strict routine when it comes to preparation, journaling and performance review. It all goes hand in hand and it enables you to make constant progress.

The most important lessons for traders here should be to take it one step at a time. During our work with traders, we see it every day: most traders try to force success and they fight the battle on too many fronts. Always identify your biggest problem area and work on one weakness at a time. There is no point in getting lost in the advanced Edgewonk features if you are still struggling with the core concepts of trading. Becoming a better trader becomes a much more enjoyable if you see actual progress by focusing on the things that will really make a difference in your trading.

When traders analyze their past performance, searching for ways to stop performance leaks or to identify other ways to improve their trading, there are usually a few things that most overlook. Flaws in your performance analysis can quickly lead to wrong assumptions about what you should change and, instead of improving your trading, you are making tweaks that lead you in the wrong direction. Here are a few tips on how to improve your performance analysis and how to utilize your Edgewonk trading journal:

Sample size and recency

Before you start making any changes to your trading approach, you have to understand the importance of sample size thinking. Generally, the more trades you have in your database, the more meaningful the results will be. However, there is a catch to it.

The concept of “recency” says that the most recent trades are more important and meaningful when reviewing your performance. Financial markets are constantly undergoing changes and volatility, momentum and trending and ranging market conditions are always alternating. Thus, when doing a performance review, make sure to use Edgewonk’s date filters and look at the most recent data first. Later on we will show you how to take this even further.

Hindsight analysis vs. consistency

Hindsight analysis is what most traders really do, where they just pull up their charts, take a look at their last 5 trades and then fish for reasons why they might have lost. Often, you’ll even see that such traders try completely new indicators and analysis tools trying to find some random approach that could have kept them out of a losing trade.

Consistence is very important for traders who want to succeed. Following your rules religiously, executing all your trades within your trading methodology’s framework and making consistent decisions allows you to perform a high quality performance review later on. On the other hand, if your trading is all over the place and you are always trying something new, the data you collect from your trading will have very little significance.

Thus, at the beginning of our 12-week trader development program, we urge our participants to stick as close to their rules as humanly possible because the insights they will get will offer invaluable new insights into their trading.

Comparing the incomparable

The problem with self-made journal spreadsheets or other conventional trading journal software is that they usually compare apples and oranges. You can’t just throw all your trading data together and then come up with one single metric for the combined data.

Especially if you are trading different instruments, markets, setups and strategies, it is crucial to separate your trading data as detailed as possible.

Obviously, if you are trading different setups, you want to get individual statistics for all your setups. Different setups are based on different premises and you want to identify individual weaknesses for each strategy and for each parameter of your strategy as well.

Furthermore, individual markets and instruments move very differently from each other and, thus, it’s important to keep track of all markets separately.

And finally, you also want to know in which market environment you are performing best. In our 12-week program, we provide tips on how to track different market conditions so that you can effectively see when your edge is greatest and when you are making your best trades. Typically, our users are very surprised to find out that certain market types are performing much better than others. Afterwards, improving your performance is often, but not always, as simple as trading more in favoring conditions and avoiding unprofitable situations.

Using tags for performance separation

It’s now probably obvious why you should separate your trading performance data as effectively as possible if you want to get the most helpful insights. We created Edgewonk in a way that allows you to personalize your journaling experience in the most efficient way. Here are a few tips on how to improve your data tracking to get better performance results from your trading journal:

Setups

Tracking all your setups individually can already tell you a lot about your trading. Create as many setups as you trade in your Edgewonk trading journal and start tagging all your trades. Then, you can individually work on different aspects of your trading with the help of Edgewonk’s performance metrics.

Quality

Instead of only looking at the outcome of your trades, grade your trades by the quality of the signal. Usually, you would grade your trade based on how well you have executed it and whether or not all your entry criteria were met.

Market conditions

We suggest setting up a Custom Statistic that allows you to track the volatility state or trending vs. ranging market environment. Here it is not necessary to get too lost in the details, but you want to be able to understand which market conditions favor your approach and when to avoid trades.

Downtrend vs. uptrend

Our research showed that markets move very differently during uptrends and downtrends. While uptrends are usually more stable, downtrends are more erratic, faster and more volatile. Just setting up a Custom Statistic that differentiates between uptrend and downtrend (based on price position relative to a moving average) can tell you a lot later on in your performance review.

Trade review and performance analysis does not have to be boring; make it an interesting and fun component of your trading. You won’t just find the perfect trading method somewhere on the internet, but with the help of an efficient feedback loop and correct performance analysis, you can build your own successful method step by step.

All traders know that emotions and discipline are very important influencing factors. Just think about your own trading for a moment and ask yourself how your equity graph would look like if you were able to control your emotions and your discipline better. But as you probably know, it’s not as easy as deciding not stop repeating the same mistakes. Once we sit in front of our charts, have to make trading decisions and need to manage our live trades, our rational thinking usually takes a backseat and we give in to impulsive and emotional thinking. We all have been there.

In Edgewonk, we developed the Tiltmeter as an effective way to help you improve discipline and emotional decision making. The Tiltmeter analyzes and visualizes how well you execute your trades and it shows your level of discipline.

4 reasons why the Tiltmeter will help you become a better trader

1. Accountability

Trading can be a lonely profession and when you don’t have to justify your trading decisions, you are more likely to abandon your rules and try to “outsmart” the market by doing things you knew you shouldn’t be doing. Because traders are usually not held accountable, the learning process takes place much slower and you will often see traders repeating the same mistakes even after years of trading.

This leads to a downward spiral of bad trading behavior. The purpose of a trading journal is not only to serve as a data storage tool, but to hold you accountable and force you to deal with your trading more objectively.

2. Self-Awareness

Before you can start using the Tiltmeter you need to write down your most common mistakes and problems so that you can then use them in your Tiltmeter. This step alone forces you to spend time thinking about your actual trading approach. Many traders never really work on their trading away from the charts. It’s is nearly impossible to become a better trader if you lack self-awareness.

3. It’s like a mentor

Our users constantly send us feedback and many say that knowing that they have to come back to their Edgewonk trading journal later to enter their trades, helps avoid making mistakes during their actual trading. Knowing that you have to go over your trades again and write down that you made the same mistake AGAIN is painful. Edgewonk relentlessly confronts you with your flaws and problems; just this alone often makes the difference for many traders.

One of our customers put it into the correct words when he wrote us an email:

Read more user reviews

4. It challenges you

For most traders, making a bad decision does not have any meaningful impact, especially if you are not trading full-time. Trading then often just becomes this hobby you do on the side, but which does not lead you anywhere and progress is often non-existent. The Tiltmeter adds a new dimension to your trading and knowing that repeating the same mistake will cause your Tiltmeter to turn red and nullify all your past effort acts as an additional motivator.

5. Find out how much you are really losing

Most traders are not even aware where they are leaking money. You can compare that to a business owner who has no diea what he spending money on and how much. By analyzing how often you have made a certain mistake Edgewonk also shows you how much money you are really losing. The screenshot below shows a common scenario where a trader would have been profitable by being more disciplined. For many traders, this will be an eye opener and once you realize how close you really are to profitable trading, you will look at your trading decisions in a very different light.

The Tiltmeter is specifically built to tackle the most common problem areas that cause traders to underperform. For many traders, the Tiltmeter can be the first and biggest step towards better and more profitable trading which is also the main reason why the Tiltmeter-challenge is at the beginning of our 12-week trader development program.

if you are not working on your trade management approach you are leaving A LOT of money on the table. From our experience, and from working with hundreds of traders, we know that wrong trade management can make the difference between a losing and a potentially profitable trader. Just think about all those trades where you moved your stop loss or take profit order around, or took an early exit, just to see later that you could have made much more money. We at

We at Edgewonk know about the importance of trade management and the problem of micro-management and that’s why provide a very powerful trade management analytic feature in our trading journal. Finding out what you should be doing with your trades is not easy, but with the trade management analytics it’s possible and you can take out the guesswork.

Introducing the trade management sheet

In the trade management tab of your Edgewonk trading journal you can see 3 graphs: blue, yellow and red.

Red: This is your actual performance, measured in R-multiples.

Yellow: The yellow line shows your potential performance. The potential performance is based on the “set and forget” approach which means that you avoid any trade management and simply let your trade run after you have entered it and set your stop and take profit.

Blue: The blue line visualizes how much you are losing or winning by actively managing your trades (more on that below).

Optimizing your trading behavior to improve your performance

Interpreting the trade management curves and finding out how to increase your performance is “where the magic happens” and it’s where you can reap the benefits from journaling your trades. The screenshot below shows the transition from a trader who made a lot of trade management mistakes that cost him money to a profitable trader who manages his trades in the most efficient way. Let’s explore how you can read this from the graphs:

Box 1: At this point, the yellow line is above the red graph wich means that the potential performance is higher than the actual performance and that the trader is losing money by managing his trades ineffectively (the blue graph is going down). The typical mistakes here are closing winners too early, letting losses run too long or mismanaging stop loss and take profit orders.

Box 2: The trader has significantly improved his trade management approach at that point. The red line has moved above the yellow line which means that his actual performance is now above his potential performance – the trader is managing his trades so effectively that he has improved the initial outlook of his trades and is making money by managing his trades (cutting losers early and letting winners run).

Set and forget

The way Edgewonk has been built is that it compares your current trading go the “set and forget” approach, where you enter your trades, set your stop loss and take profit orders and then let your trade run without interfering with it again. From our daily work with traders we have seen that micro-managing trades and constantly fiddling with trades is one of the main reasons why traders make mistakes and lose money. The yellow graph in the Trade Managament analytics, therefore, analyze how your trading would have performed without touching trades. The goal is to find out if you should stop interfering with your trades and finding error sources.

Taking out the guesswork with Edgewonk

It is fairly easy to know that you are doing something wrong by looking at your account balance alone. The real power is knowing WHAT you did wrong and HOW to change it. The way the Edgewonk trading journal is designed, it helps you find out what you are doing wrong and under which situations. You can apply the different filters (red and green buttons) and so analyze your trading very specifically and only focus on certain parts of your trading. That way you can find out when you are making your worst trades and when you are making good trades.

Throughout our 12 week trader development program we show you exactly how to improve your trade management and we take you by the hand so that you can find your edge and become a better trader.

Trading and growing a small trading account is not easy but not all traders can just fund a big trading account right from the start. At Edgewonk we are aware of that problem and that’s why we created our trading journal in a way that also enables traders with smaller accounts to find ways to grow their accounts without adding too much risk.

Trading a small account is much harder and many problems traders have are related to account size. We’ll first take a look at what those problems are and then explore how Edgewonk can help you get to your goal and grow a small account.

The problem: small winners, excessive risk-taking and over-trading

It takes a very long time to grow a small trading account and it can be frustrating when you trade for 1 or 2 years but you only make a small amount of money. For example, trading with a $1,000 account and risking 2% per trade means that you only make $20 on a winning trade with a reward-risk ratio of 1. Usually, those are not the returns traders are hoping for when they want to become professional traders and this quickly leads to excessive risk taking and over trading.

Traders with small account quickly enter the downward spiral of undisciplined trading and taking too much risk. And once in a drawdown, those traders tend to adopt a gambling like attitude where they just somehow try to recover their losses. You need to stay away from such behavior because unlearning negative behavioral patterns can be very hard.

How to grow a small account the right way with Edgewonk

Although there are no tricks involved that will suddenly help you double your small account every few weeks, there are certain things you should focus on when starting with a small account.

Traders with a small account have to understand that making money should not be their main goal initially. The main goal when trading with a small trading account is to build your trading character, create a professional trading mindset and improve your strategy step by step to set yourself up for successful trading. We will soon learn what all that means.

#1 Build a professional mindset

Trading like a professional starts in your head. Being disciplined, following your rules and always seeking ways to improve your skills and your trading strategy are the cornerstones of professional trading. We at Edgewonk know about the importance of thinking like a professional and that’s the reason why the Edgewonk trading journal comes with a variety of different tools and features that help you along the way:

The Tiltmeter is the most popular psychological tool in Edgewonk because it acts like a personal mentor and shows you exactly how you are performing. A red Tiltmeter means that you have repeatedly broken your rules and made mistakes. A green Tiltmeter shows a disciplined trading approach.

In the 12-week trader development program, the Tiltmeter challenge is the first task we challenge our users with because it is the fastest way to build a strong and more professional trading character. And if you are trading with a small trading account, being disciplined and respecting your rules is of great importance; it lays the foundation to your future trading career.

#2 Improve your trading strategy

Instead of risking more money, improving your current strategy will help you grow your trading account even faster. Edgewonk comes with dozens of tools and features that analyze your trading strategy and then provide actionable tips on how to adjust your parameters to improve your winrate, get greater winners, cut losers and get more profitable trades:

• Stop giving back profits and get bigger winning trades
• Improve trade management and make better in-trade decisions
• Professional position sizing step by step

At Edgewonk, we believe, and we have seen it first hand by talking to our users, that instead of changing your trading strategy all the time you should focus on improving the one you already have. No system will work right from the start, but almost all systems can be turned into a profitable one. Most traders take a good system and destroy it by trying to turn it into perfect one.

#3 This is what awaits you with a small account

OK, you know that you have to develop a professional trading mindset and improve the trading strategy you have, but what about the money? How much can you really make with a small trading account? The Edgewonk trading journal comes with a risk and performance simulator that lets you simulate your potential future trading performance.

The screenshot below shows a potential account development for a trading account with $250, a winrate of 60% and an average reward-risk ratio of 1.2. Those are relatively conservative statistics but the small trading account grows to a substantial amount of $12,000 – $26,000 on different simulations (the different graphs).

Doesn’t sound too bad to turn $250 into $26,000, right? However, there is a catch. For the first 300 trades, the account barely does anything and it grew very, very slowly. This slow-growth period is the time when most traders throw in the towel, ramp up their risk, look for a different system and deviate from their original plan. 300 trades with very little account growth can be hard to deal with and most traders will never get to the right side of the performance simulation.

#4 Add to your account

Once you have proven that you can trade profitably for a period of time, you can think about adding to your trading account. And even if it is only $50 per month, it will help your account growth significantly. Turning a small into a big trading account is a hard and very tough grind. Traders need perseverance, passion and a desire to make it.

Here is our checklist that will help you grow a small into a bigger trading account:

• Realistic expectations. Be prepared to not make (a lot of) money for a long time
• Developing discipline and a professional character is the number one priority
• Improve your trading system steadily instead of jumping from one method to the next
• After you have proven to yourself that you can trade profitably, think about adding to your trading account
• Accept that trading a small trading account is a long and hard task
• Enjoy the process and develop a passion for trading to fuel your endeavor

If you are looking for help on your journey, take a look at our 12-week program where we help you understand the Edgewonk trading journal and walk you through the process of becoming a better trader.

“It’s not enough to simply measure things – you have to measure what matters” – Waren Buffett as quoted by Tim Ferriss.

Financial markets are highly complex and constantly undergoing changes. Add to that the fragile nature of human emotions and how easy we tend to make impulsive decisions and you quickly get a feeling for all the variables that could possibly impact your trading performance. Looking at all the variables and the potential variables, it’s very easy to get lost when looking at the task ahead: finding out what is causing you to lose money and how to change that.

At Edgewonk we know that feeling and the helplessness many traders experience. That’s why we have designed our trading journal in a way that allows you to only focus on what is really important so that you can make progress in your trading fast. Here are 4 tips when tracking trading data.

What should you focus on when tracking data in your trading journal?

1. You have to be goal-oriented with your journaling

In the Edgewonk trading journal, everything we track is directly related to one stat: Your performance – account balance or %-return. For example, the Trade Management function allows you analyze your potential performance, compare it to your actual performance and then find scenarios where you are leaving money on the table; or, the Tiltmeter shows you exactly how disciplined you are and how much breaking your rules is costing you.

With the Edgewonk Custom Statistics you can track basically anything you want, but we always encourage our users to focus on the big problem areas that really can make a difference and not get lost in the details. Thus, always track stats that undeniably cause your performance to improve or diminish.

2. It has to be actionable

Most conventional journals or self-made spreadsheets are somewhat of a “data graveyard” where traders collect their trading data, but then don’t have a process or a way of interpreting the data to get actionable tips on how to improve trading performance.

In Edgewonk, we only ask you to enter trading data that can really make a BIG difference in your trading. The underlying algorithms and calculations only have one goal: finding your performance leaks AND showing you how to change your trading to improve your trading performance.

It’s only worth spending the time keeping a trading journal, if it helps you become a better trader. Other than that, you are just wasting precious time.

3. It has to be easily understandable

Crunching numbers should be easy. You have to see at one glance what they tell you. If every time you look at your metric you first have to think about its implications, there is definitely an easier way to measure what you want to measure. Think about Occam’s Razor.

You also may want to discuss your results with other people – if so, you shouldn’t have to explain your metrics because they should be self-explaining.

We understand that looking at the Edgewonk trading journal can be overwhelming at first, but it really is not that bad. And if you still feel a little lost, you can join our 12 week journaling and trader development course where we take you by the hand and help you become an Edgewonk and journaling pro.

4. Avoid time-wasting

Edgewonk comes with a lot of metrics and things that you could track, but you don’t need all of them at the same time. What you should be doing instead is focusing on 1 or 2 areas of your trading at a time and aim at making improvements there first.

Thus, you should always identify your greatest problem area first, track the related metrics in your Edgewonk journal and then consult the right features to get actionable tips. And after you have improved your trading in that area, you pick a new one and start all over again. This approach will allow you to reduce the time it takes to enter trades into your Edgewonk journal, while keeping the data as relevant as possible.

Conclusion: Make The Most Of Your Effort By Tracking The Right Things

Perfectionism rarely pays off; blind perfectionism never pays off.

In a business like trading which depends on thousands of variables, it is easy to get caught up in a slaughterhouse of numbers which then usually leads traders to give up on their journaling altogether. Only track what matters, keep your data relevant, look for actionable results and enjoy the process! We know that journaling can be tedious and boring at times, but when you keep the end goal in mind, it makes the journey much more enjoyable. And if you don’t want to go this journey alone, take a look at our 12 week course where we have helped hundreds of traders.

We receive wonderful feedback on a regular basis, and we would like to thank you for that. Today we will talk about one email in particular where one of our users perfectly described how we intended Edgewonk to be used. Of course, there are many other ways when it comes to integrating Edgewonk into your trading day and your routine, but especially for beginning traders who have a feeling of being lost or feeling helpless, this user’s insights provide helpful tips – we included the email at the end of this short article.

A lack of responsibility in trading

When something is not going according to plan or when you don’t fully understand how to turn your trading around, it’s very easy to start blaming the markets, an unleveled playing field and just unfair conditions in general.

Looking for excuses and blaming outside circumstances feels great because, then, the lack of success is not your fault and you are not responsible for your failure. Many traders choose to go this path simply because it eliminates the need to face the real problem: a lack of seriousness and professionalism when it comes to your approach to trading.

Without taking responsibility for your failures, improvement is impossible.

Doing what is necessary vs. doing what is easy

From the email below you can see that our user decided to put his active trading on hold for a while because he understood that just trading more wasn’t going to solve his problems. Instead, he went back to his past broker data and transferred his past trading information (manually!) into his Edgewonk trading journal. From our email exchange I know that he transferred more than 250 trades which must have taken quite some time, but he realized that if he wanted to become a better trade, he had to put in the time.

In trading, just as in life, we usually always know what we should be doing: stop eating junk food and start exercising, cutting back on TV consumption and studying for the exam, waking up one hour earlier to write a trading plan; but knowing what to and actually doing it are two very separate things, right?!

Unfortunately, there is no trick that will suddenly make those tasks easy and effortless; you just have to be clear about what you want and then take the steps necessary.

“Nothing worth having was ever achieved without effort” ― Theodore Roosevelt

Self-awareness

A trading journal is the easiest and fastest way to become more self-aware of your trading. Most traders will never look at their trades again after they have closed them. This is a HUGE mistake because you are robbing yourself from learning from your mistakes. And it would just take a few minutes…

The average trader repeats the same mistakes over and over again. Mostly because he is not even aware of how much those mistakes are costing him. A trading journal forces you to re-live all your past trades once again without all the hectic and emotional battle that exists during your live trading.

Your system is not the problem

This is usually a huge revelation once traders can actually see that not their system is causing them to lose consistently, but that they are the real problem.

You have probably heard the phrase that you are your greatest enemy as a trader countless times, but those hollow phrases quickly lose their meaning. However, once Edgewonk shows you, based on your own personal trading data, that it’s you who is causing your losses and that profitability could be already within reach, many traders finally start to listen.

Edgewonk is not a Holy Grail, neither is it going to be your quick way out, but if you are serious about trading and tired of not seeing results, going a different direction and putting in the work is the surest way to becoming a better trader.

And now, we want to let our user’s words speak for themselves and we are user that many traders will recognize themselves here: