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.
What to focus on in Edgewonk as a beginning traderEdgewonk offers many different features and functions we want to help you make your journaling experience as effective as possible. Here are the most important features beginning traders should focus on. As a beginner, you can leave out most of the advanced functions and add them later on. This way you will be able to use your Edgewonk trading journal more effective and save yourself a lot of time. – Tiltmeter and the comments about entries/exits/trade management |
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.
What to focus on in EdgewonkAt this stage, it’s usually still too early to get into the advanced Edgewonk features and you should focus on building a solid framework for your trading, instead of getting lost in the nitty gritty. – PCP and PCR and focusing on expectancy (The Edgewonk traffic lights that calculate your expectancy) |
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.
What to focus on in EdgewonkNow it the time to put the odds in your favor , take a look at what works and what doesn’t. It’s important to stay away from changing your system and resetting your learning curve. – The Performance Simulator |
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.
What to focus on in EdgewonkAt this point, especially traders who have participated in our 12 week program, will have a deep understanding of their own trading and how to utilize their Edgewonk trading journal to work on very individual and personalized goals and problem areas. To keep improving, the advanced trader should always pick one area of his trading he wants to work on and then record the specific fields in his Edgewonk journal to activate the righ function. The advanced trader can repeat this process many times and so fine-tune and continuously improve his own trading one trade at a time. |
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.