How to evaluate an edge

GamePlan divides the different edges into three categories.
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1. Strategy looks at the mechanics of your trading:

2. Timing looks at when you trade:

3. Psychology looks at specific triggers during your trading that may impact your performance:

Traders will exhibit different behaviour for different edges. Here we outline the process to follow for each of your trading edges to make the best decisions on how to improve.
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This example will use the Product Edge charts, but this process can be applied to all edges.
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There are 2 steps

Note: We will never identify a strength or weakness unless you have traded the specific edge at least 30 times, and depending on your specific habits, it may take more trades than this. 

First we need to examine what we were doing and how our trading returns are impacted.

1.1.1 Trades Tab

 First look at the trades tab, and determine if GamePlan has identified a strength, a weakness or both. If there are no highlighted bars, it is possible there is not yet enough trade history to determine a pattern, OR you are not exhibiting any different behaviour in this edge.
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Continue to monitor as you perform more trades.
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If GamePlan has identified a strength or a weakness, then these are the ones to focus on. In this example, looking at products, this trader performs well trading XAU/USD and underperforms trading DE30/EUR.We will refer to these as GOLD (XAU) and DAX (DE30) for the remainder of this article.
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1.1.2 P&L Tab

Look at the “P&L based on product”. There are a number of views here.P&L based on product shows the cost of the weak product and in this case the profits being made on the successful product.

The P&L by winners and losers is showing us the for the DAX trades the losing trades are losing a lot more than the winning trades, which is not the case for the GOLD trades where we can see that winning P&L is higher than losing P&L.

Thirdly, when we look at the impact of outlier trades, we see that the middle 90% of trades has only a small impact, and in fact for this trader it is the Top 5% and the Bottom 5% of trades that are significant in the understanding of the performance of the products.

1.1.3 Performance Tab

In this breakdown, we example the performance at a “per trade” level.We can see that comparatively each DAX trade is losing approx. 20% while each XAU trade is actually making 60% returns.

With the Expected P&L per trade chart this equates to average loss of €200 for each DAX trade, and average win of €450 for each GOLD.

For example, you may have a strong product returning 5% and a weak product returning -5%, but if your position size on both products is different, your strength may result in small profits, and your weakness may result in large losses.

Focus on trading small size while you improve the performance of your weakest product.

With a clear understanding of both the overall impact, as well as the individual trade impact of this edge, there are a number of considerations for each trader to ask themselves.

Immediate Actions:

Longer Term Actions:

To assist in continuous improvement lets now delve into the metrics.

Here we examine how we can use our metrics to target improvements

1.2.1 Win Rate Tab

This trader has set a win rate target of 63%. In his strong GOLD trades he is well above this target, while for his underperforming DAX trades he is slightly below.

 Win rates can vary for different strategies and for different markets, and it is the combination of win rates and risk:reward ratios that define profitability. It is often better to focus on these metrics together rather than individually.
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1.2.2 Risk Reward Tab
Using the Risk:Reward based on product it is clear that the GOLD trades are massively outperforming the DAX trades. GOLD with a ratio of almost 1 means that winning trades and losing trades are on average the same size. However, DAX trades with a R:R of 0.4 mean that each winner in less than half the size of each losing trade. 

This becomes even more clear on the Average P&L per trade by winners and losers where the DAX winners are €500 compared to the losing trades which are €-1250.

Often the reason winning trades are smaller is related to disposition to we will move to the final step.

1.2.3 Disposition Ratio Tab
For GOLD trades, this trader is clearly letting his winning trades run, as he spends proportionally more time in winners. The opposite is true for the DAX trades Lets analyse these separately.

For DAX this trader is spending on average of 50 minutes in the winners and 6 hours in the losing trades. So he’s clearly mostly day trading in this market.

For GOLD he is spending almost 24 hours in winners and over 12 in losing positions. Hence he is probably trading on a different timeframe possibly with a different strategy.
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In Summary:

Use this 6 step analyse for all trading edges to reflect and consider the impact on your personal style of trading.