Good Trade, Bad Trade: Quantifying the Shape of Trades

Every trade can be quantified in the degree of their being Good Trades or Bad Trades. Here is how to do it:

Good Trades

There are several dimensions that generate together a good trade.

• Is the trade in the direction of the dominant sentiment/trend? 5 points
• Has the price never turned into a loss? 5 points
• Has the trade taken less than 4 hours to complete? 5 points
• Has the trade achieved 20 pips within 1 hour? 5 points
• Is the ratio of target profit/loss close to 2:1? 5 points

What is the score on this Good Trade?

The trade opened to buy at 108.99 and proceeded to dip a bit by 10 pips and then it continued to go into profit territory and closed at 109.17, for a result of 18 pip profit.

We can see that the trade was in the direction of the sentiment, which was bullish. So we give it 5 points.

Well, the price did turn into a period of loss, while small we can’t give it 5 points, so we will give it 4 points. The trade was intra-day and the duration of 2.2 hours is acceptable.The result is 13 points.

TRADE ID: 546 USD/JPY
BUY: 108.99
PROFIT TARGET: 109.2
STOP LOSS: 108.6
TRADE DURATION: 2.2 HOURS

Bad Trades

There are several dimensions that together generate a Bad Trade.

Let’s look at the following bad trade.

• Is the trade in the counter sentiment or trend direction? 5 points
• Has the price turned from a profit to a loss? 5 points
• Has the duration of the trade taken more than 4 hours to complete? 5 points
• Is the ratio of target profit/loss below 2:1? 5 points

What is the score on this Bad Trade?

Well, we can immediately see that the Sell direction was NOT in alignment with the sentiment. The price was bullish, and the trade was bearish. Why trade against the trend? So this factor generates a -5 score.

We can also note that the trade was almost never in profits, and therefore gets a score of -4. A redeeming factor is that the trade is only half and hour, we can give it a score of -3. The trade also reached a -10 pips within the first hour and therefore gets a -5 score. The total score is -17 out of -20.

TRADE ID: 544 GBP/JPY
SELL: 142.29
PROFIT TARGET: 142
STOP LOSS: 142.5
TRADE DURATION: 0.5 HOURS

About the author

Abe Cofnas is a world-class leader in providing top-level analysis of currency markets, integrating fundamentals and sentiment analysis with trading tactics. He has trained thousands of students in how to understand and trade market forces. He has delivered seminars in Beijing, Shanghai, Macau, Singapore, the US, Dubai, and London. In 2015 Abe delivered weekly market scans in Shanghai for China Fortune Television. Abe Cofnas has provided a bi-monthly column -The Forex Trader for Futures Magazine ( Now Modern Trader) from 2001 to 2017 generating 120 columns.

If you would like to have an exclusive XRay and analysis of your trades, just send a CSV file showing your recent trades and I will provide you an analysis. Send to:  abe.cofnas@scandex.com

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