How do you assess technical trades for performance and risk?

1 Define your trading goals and strategy

Before you enter any technical trade, you should have a clear idea of what your trading goals and strategy are. Your goals should be realistic, measurable, and aligned with your risk appetite and time horizon. Your strategy should be based on your preferred style of trading, such as scalping, day trading, swing trading, or position trading. Your strategy should also specify the technical analysis tools and techniques that you will use to identify entry and exit points, trade size, stop loss, and take profit levels.

2 Choose your technical analysis tools and techniques

There are many technical analysis tools and techniques that you can use to analyze the price action and market conditions of your chosen asset. Some of the most common ones are trend lines, support and resistance levels, moving averages, Fibonacci retracements and extensions, candlestick patterns, chart patterns, oscillators, and volume indicators. You should choose the tools and techniques that suit your trading style, timeframe, and market context. You should also use a combination of different tools and techniques to confirm and validate your trading signals and avoid false or contradictory signals.

3 Apply your technical analysis tools and techniques to the price chart

Once you have chosen your technical analysis tools and techniques, you should apply them to the price chart of your chosen asset. You should use a charting software or platform that allows you to customize and adjust the settings and parameters of your tools and techniques. You should also use multiple timeframes to get a broader and deeper perspective of the price action and market conditions. You should look for consistent and reliable patterns and signals that indicate the direction, strength, and momentum of the trend, the potential reversal or continuation points, and the support and resistance levels.

4 Evaluate the performance and risk of your technical trade

After you have identified a trading opportunity based on your technical analysis tools and techniques, you should evaluate the performance and risk of your technical trade. You should use some quantitative and qualitative measures to assess the potential reward and risk of your trade, such as the risk-reward ratio, the win rate, the expected value, the drawdown, the volatility, and the market sentiment. You should also use some risk management techniques to protect your capital and limit your losses, such as position sizing, stop loss, take profit, trailing stop, and hedging.

5 Monitor and adjust your technical trade

Once you have entered your technical trade, you should monitor and adjust it according to the price movements and market conditions. You should use your technical analysis tools and techniques to track the progress and performance of your trade, and to identify any changes or signals that may affect your trade. You should also use your risk management techniques to lock in your profits or cut your losses, and to adapt to the changing market environment. You should also keep a trading journal and record your technical trades, including the reasons, results, and lessons learned from each trade.

6 Review and improve your technical analysis skills

The last step in assessing your technical trades is to review and improve your technical analysis skills. You should regularly analyze your trading performance and outcomes, and identify your strengths and weaknesses. You should also seek feedback and guidance from other traders, mentors, or experts who use technical analysis. You should also keep learning and updating your technical analysis knowledge and skills, and test new tools and techniques on a demo account before using them on a live account. By doing so, you can enhance your technical analysis skills and increase your chances of success in technical trading.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?