Improve Day Trade Performance by Sorting Winners and Losers

By:michael gentleman

Every daytrader is looking to improve performance. Some are discretionary traders while others use a systematic approach. Both can use some analysis to improve their trading results.

Optimizing trade performance starts with analyzing past trade data.It is very important to track every trade and its characteristics. After building a database the analysis can begin. The first step is to sort the trades. An important first sort is by winning and losing trades. Winners and losers share characteristics and careful analysis will unlock better overall system performance.

Two prominent characteristics of winning trades are time and price. One of the most important goals after a trade has been executed is defining it's likely outcome. Sorting previous trades can help accomplish this goal. Isolate all the winning trades and sort by length of time in the trade until closeout. Find the average time in the trade. Compare that number to the same calculation with the losing trades. The winners have a longer average time than the losers. Losers will tend to be quick.

It seems like this piece of information is minor. But, it can be a powerful tool to the daytrader. If you delve deeper into the data in excel you can isolate a time frame that defines when only winners survive. Create a histogram that gives the winning probability by elapsed time in the trade.

Using this piece of information can improve your performance in a couple of ways. Consider different trade entry rules that don't commit your entire capital on the initial signal. Use simple time checkins to add size to your trade to reach your optimal trade size. It can be a simple as buying every five minutes as long as the trade is alive. By staggering the entry, the quick losing trades will automatically have lower size than your long winning trades. The average winner will improve as the average loser will decrease. This lowers the overall drawdown potential . It will also raise your expected return.

An old trading maxim is to cut winners short and let winners run. Knowing your time performance data helps accomplish this goal. If you track the PL of your trades on every bar, it leads to another discovery. Graph the results and look at the chart. The winning trades not only last longer but have an upward slope. The losers will have a downward slope. Employing a trailing stop will cut the losers off but allow the winners to run by having a trailing stop below the winning slope.

Analyzing past trades is the key to improving results.

Digg del.icio.us Blink Stumble Spurl Reddit Netscape Furl

Article keywords: daytading, trading

Article Source: http://www.articles2k.com

Mike writes about trading systems .If you are interested in improving your trading results then visit his website for further information.Capitalist Attitude can improve your results.

Top Investing Articles
1). Day Trading With The Camarilla Equation By : Steve Waller Origins of the Camarilla Equation Discovered while day trading in 1989 by Nick Stott, a successful bond trader in the financial markets, the 'Camarilla' equation uses a truism of nature to define market action - namely that most time series have a tendency to revert to the mean. The equation produces 8 levels that are meant to predict these reversal points allowing the trader to profit from them.
2). HYIP’s versus Autosurfs: Which Is Better For You? By : Hyip-Status.com A high yield investment program is essentially an investment in which you have the choice of how much you can invest in the program, hoping for a high yield. Any amount can be invested in a HYIP, and in fact small amounts works rather well for HYIP’s, but there is an advantage (and disadvantage) to using large investments. An autosurf is better known as a “traffic exchange”; a person buys advertising that is placed in rotation with other advertisements.
3). How to Interpret and Profit from Financial Statements By : Pleeds Financial statements are a useful tool for judging the health of a company, and for comparing it to its competitors. They show what the company owes and owns, the profits or loses it has made over a given period, and how their position has changed since their last statement. Generally if you can tell which direction a company is heading in, you can also forecast future stock prices with some accuracy.
4). Taking Control of your Finances. By : Debra Lohrere To find money to invest for your future, you need to make sure that your outgoing expenses are less than the income that you are receiving. You need to develop an excess that you can have free to invest. Now before you start to think….”well I don’t have any excess left…if I was earning more money….then I would have some free”. Let me dispel this myth…and tell you that it is a known and excepted fact that the amount of money that people earn has little if any bearing on whether or not they have an excess left to invest.
5). High Yield Investing Is Like A Game Of Poker By : We often get newbies emailing us asking whether or not investing in HYIP's is worth the time and the risk. This is a great question and the short answer is "it all depends". First of all, the main question you must ask yourself before investing in any HYIP is: "Do you plan on investing money that you will definitely need in the future?" In other words,.
6). Why Are Duopolies So Competitive? By : Geoffrey Gannon A value investor looks to human nature to explain why duopolies are often so competitive.
7). Different Kinds Of Investments By : Juan José These days, you can’t retire without using the returns from investments. You can’t count on your social security checks to cover your expenses when you retire. It’s barely enough for people who are receiving it now to have food, shelter and utilities. That doesn’t account for any care you may need or in the even that you need to take advantage of such funds much earlier in life.
8). A Cooling Real Estate Market and Investing in Pre-foreclosures By : John Appleseed With the housing market cooling and demand for mortgage loans shrinking, banks and other lenders are turning to nontraditional and sometimes riskier mortgages to bring in additional business and make up their dropped off business. Many lenders have turned to mortgage products designed to lower monthly loan payments and to help borrowers qualify more readily for larger loan amounts, while others require little in the way of documentation during the approval process.
9). FOREX Investing Compared to Other Investment Opportunities By : Cindy Brooks With over $1.5 trillion changing hands daily, it might be advantageous for you to investigate the extremely lucrative business opportunity involving currency trading. Once the domain of major banks and corporations, this field is now an open playground for the ordinary individual. The following information gives you a comparison of different investment opportunities in comparison to Forex trading Forex could be the perfect opportunity for you if you are willing to have an open mind and investigate.
10). A New Exchange Traded Fund May Have a Major Impact on Long Term Silver Prices By : Andy Goldman Last week after much publicity and a long wait, the Barclay’s Silver ETF (SLV) finally started trading. And it looks like the wait was worth it.

New Investing Articles
1). Stocks - Getting Started in the Market By : Joseph Kenny Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-trading, devious power brokers making back room deals; it all makes for great drama.
2). Introduction to Bonds By : Jim Pretin Learn about bonds and why they are a good investment vehicle
3). What Is An Investment Club? By : Roy Phay Investment clubs are very hot in the market nowadays. Thousands of individuals are investing through clubs, and many of them find a great deal of success.
4). Market of the Game By : Steven Golden An article about game economy
5). Choosing the Right Capitalization By : Robert Valentine Small, mid and large cap stocks all have their individual benefits. But which one is right for you?
6). Investing in St. Louis Real Estate By : Robert Palmer It is common for investors to express uncertainty over their ability to manage their portfolios during prolonged periods of market volatility. But prudent investors understand that making sound investment decisions shouldn’t be based on the market’s twists and turns. Rather, these decisions should stem from an understanding of investment fundamentals and an awareness of the mistakes others have made.
7). How Investment Options Works The For Buyer By : Ian Dennis A call investment option is a financial contract involving two parties, the buyer and the seller of this type of investment option. Often it is simply labeled a "call". The buyer of the option has the right but not the obligation to buy an settled quantity of a particular commodity or financial instrument from the seller of the option at a certain time for a certain price.
8). The Dow Jones Industrial Average: Failing the Average Investor By : Steve Selengut In addition to a well thought out Investment Plan, successful Equity investing requires a feel for what is going on in the real world that we all refer to as "The Market". To most investors, the DJIA provides all of the information they think they need, and they worship it mindlessly, thinking that this time tattered average has mystical predictive and analytic powers far beyond the scope of any other market number.
9). How to Spot Market Turning Points Using Free Legal Insider Information By : Steve Todd How would you like to be able to take advantage of insider information and trade with the most successful traders in energies commodities, stocks and commodities? Well you can - with the commitment of traders report, published by the CFTC. This report shows insider commercial trading positions by professional hedgers! The commitment of traders report is available FREE, but hardly any traders use it - yet it can predict tops and bottoms, with amazing accuracy, when used correctly.
10). Market Timing – A Danger to Your Financial Success By : Steve Todd Market timing are the two most dangerous words in investing - especially when practiced by novice traders. Market timing is the strategy of attempting to predict future price movements through use of various fundamental and technical analysis tools - and when used to predict trending moves, ends in disaster, and losses. Many investors feel that market timing is the same as trend following and the two go hand in hand, they don’t.