Analyzing Your Forex Trades

When you are putting together your Forex trading plan, you will need to plan a time to watch the market, a time to place your trades, rules for placing those trades and exiting them — and also set some time aside each day or week to analyze your trades. It is good to analyze your trades after you make them, but it is also a good idea to set aside some time to routinely review your progress (or regress) on a regular basis after your mind has had some time to settle. Sometimes you cannot see a trade clearly right after you have taken it, and you will have a clearer perspective if you go back and analyze it later. What should you look at when analyzing your currency trades?

It is not enough to win trades — you have to know why you won them. And if you lose a trade, you need to figure out why you lost that trade so that you do not repeat the same mistake twice. Some losses are inevitable — even if you are following a trading method — and that is something you will have to accept. But many losses are avoidable, and only in analyzing your losses will you find ways you can adjust your system (or yourself) to avoid future losses. Likewise, a Forex trade won for the wrong reasons is really a trade you lost — if you won a trade through chance, that is not something you want to repeat in the future. You want to win your trades through following your method and not through abandoning it — or you will end up losing everything.

So when you look at your trades, ask yourself whether you were following your method when you took the trade. If you did, then ask yourself why the trade was a good trade, or why it was a bad trade. You do not want to adjust your system for every loss, but you may notice patterns over time which may lead you to long term adjustments in either your method or your behavior. If you discover that you did not follow your Forex method, then you will need to ask yourself why. Did you get nervous and cut out of a trade early?  Did you keep waiting around for the trade to “come back” and turn a small loss into a large loss?

What are some examples of mistakes that could call for adjustment? If you find out you have been losing trades you would otherwise have won because you became impatient and exited your trades early, you can become conscious of your lack of self-discipline and correct it during future trades. If you discover that your method is causing you to lose trades because you are entering setups with a poor context, you can adjust your entry rules to account for the context in a more inclusive way. The market evolves, so your system will need to evolve with it — as will you. Analyzing your Forex trades is the key to keeping up with those changes and growing with them.