? Your actual profit-to-loss ratio
? The true size of your average winner
? The true size of your average losing trades
? Your actual number of winning trades
? Your actual number of losing trades
? Your REAL ROI from your trading efforts in both time and $
? Your projected annual income from your trading ? based on real numbers from your current trading
So how does this help with your confidence if the numbers don?t look so great? Especially if you haven?t yet experienced a level of success that you desire?
Well, very specifically these numbers give you a very clear reference point to work with regarding the factors in your trading that make the bottom line what it is. Rather than going on hope and wishful thinking, you now know the particular aspects of your trading on which to focus your efforts ? a realize results. It brings a great deal of clarity to the exact direction for you to take.
Just this simple step alone with give you a substantial boost, and part 2 will really bring about a transformation.
Step 1 Part 2.
In this part, you simply backtest your system (whatever it is) very specifically according to the rules of the system using recent historical market data for the markets you trade.
You then run the metrics and compare the two. This information is incredibly powerful in two ways for building both your confidence and your discipline to stick with your system. Here?s how this works for you.
By backtesting your system with historical data, this can give you a very clear measure of what your forex currency trading system is capable of delivering for you. If your current trading is not delivering the profits that you want, you need to knowif the problem is with the system or if it in your execution of the system.
If your current trading results are comparable to the backtesting results, then you know immediately that you need to take a closer look at the system you?re using.
If your backtest results are good, but your current results with your system are not, then you know that you need to focus on your execution.
Most importantly, if your system doesn?t backtest well, then you know straightaway that you need to consider changes to the system you?re using, either a new system altogether or changes to the one you?ve got.
Directly for confidence and discipline, if your system tests well, then your confidence in it should go way up, along with your discipline to stick to it ? because you are providing PROOF to yourself of its capabilities and limitations and with real numbers.
Plus you can see its limitations and more easily get through short losing streaks and drawdowns while maintaining confidence in your system, thus making the discipline part of sticking with it much easier.
Step 2. The More Intensive Process
If you have gone through the process in Step 1 and find that your system is good but your execution is where you need to focus and you need assistance working through other possible emotional management issues, then you need to seek out resources specifically for finding the core issues to address. Go to Inside Out Trading for resources specifically created to help you with these.
In conclusion, confidence comes from thorough understanding and successful experience. Once you have a system in which you can have confidence, then the discipline to stick to it gets much much easier.
Analyzing your current trading then backtesting your system can provide a great deal of confidence and thus make sticking to your system considerably easier by knowing the particulars of how it makes your bottom line what it is and what your system is capable of delivering.