Strategy

How trading strategies can set you up for success

How can you get that extra edge to increase your chances of market success? We explore the importance of strategy and how our tool can help improve your trading performance.

In trading, not taking the time to plan your strategy is a common mistake, as the likelihood of you having long-term success without one is slim. A trading strategy should be consistent, objective and quantifiable. When executed correctly, it can reduce your risk and help you succeed in the markets.

But how can you determine whether your strategy is worthwhile? First, it needs to be tested on the markets. Putting a plan into action can reveal issues that don’t appear in your research. This leads to the common consequence of traders discarding a strategy after one or two disappointing trades. “Don’t react impulsively after a bad trade or bad day,” says Ann Hunt, CEO, Chasing Returns. “You need to give your strategy time to work.”

There’s evidence to back this up, too. Traders who continuously trade on new products in the hope of finding a strategy are regularly outperformed by traders “who stick to five products or less”, she adds. Additionally, having a strategic approach is about establishing clear goals from the outset. “The most successful traders will typically have a clear strategy and execute on it,” agrees Giles Watts, SVP & Regional Business Director, UK & EU

The significance of strategy is, understandably, not limited to trading. In an increasingly analytical sport, Saracens coaches and players no longer only rely on conventional rugby strategy. They use performance analytics to tweak tactics and change a match’s outcome, or protect a player from potential injury.

Finding your trading strategy

Just as a coach would measure their team’s efforts, our Performance Analytics tool helps you track the performance of your trades. It is designed to help you discover effective trading habits, like the above, in your own portfolio. With the use of features like Psychology Edges, you can find out how your performance differs when you re-enter the market quickly, or whether opening a new trade during a ‘hot streak’ negatively impacts your success.

There are no shortcuts to market success – it requires planning, perseverance and constant data analysis. However, you can create a more effective trading approach by analysing your previous trades. “We help traders set realistic expectations so they’re more likely to hit their short-term targets and that builds the confidence for them to continue on their journey”, says Ann.

For example, you might use the Strategy Edge within our tool, breaking down the data to reveal a forgotten product that you’ve had success trading in the past. Alternatively, our tool might tell you that your profit-loss ratio in your most traded markets has taken a dive lately, which you can use to pivot your strategy accordingly.

Ready to use Performance Analytics to enhance your trading strategy? Get started by clicking the button below.