I was chatting with a student over the weekend and I was asked what I typically do once a trade is over. While most traders like to soak in the glory of beating the market and booking a money making trade, there are a few more steps that I take to insure that the trade is also a learning event. This is a brief outline of my post trade review.
1. Analyze, Analyze, Analyze
I have an online spreadsheet that I use to list every single trade that I take. This spreadsheet covers things like the size of the trade, trade direction, profit & loss, commissions, Risk Reward Ratio, and most importantly what Advanced GET Strategy I used. All of these things are important. There are some services out there that will work with respective brokers and calculate this for you. While this does help document the trades, I've found that I can add a fair amount of customization by doing it myself.
I'm by no means a Microsoft Excel programmer, but I've found that it is a good way to keep the trades organized and run statistical tests on my results. Because I'm traveling so frequently, it is important that the spreadsheet be accessible from anywhere. I have mine uploaded via Google Documents. As long as I have an internet connection, my spreadsheet is available.
When you document your trading results like this, you'll begin to see some interesting things. Maybe you trade better when you are going short; maybe you trade a particular strategy better than another. All of these things deal with the internal mechanics of your trading and can reveal patterns about strong and weak points in your approach.
2. Start a Trading Journal
This can become one of most powerful weapons in your arsenal. A trading journal is a place to reflect on what went well with a particular trade and areas where you can improve. A trading journal is not much different than the trading spreadsheet. The primary difference is that the trading journal looks more at your behaviors and emotional state than the raw numbers. Like the trading spreadsheet, I want it to be accessible from anywhere. Private blogs are a great way to keep your work protected; but it doesn't have to be complex. A good trading journal can be as simple as a spiral bound notebook.
The trading journal can be quite revealing as it highlights you behavioral tendencies and habits. If you are getting out of good trades early due to being uncomfortable and nervous, the journal is the place to note that. Many traders place importance on the trading journal, but few traders actually follow through and start one.
Both the Trade Spreadsheet and Trading Journal are quite helpful as you review your trades. By maximizing the use of these tools, you will inherently also reinforce the discipline required to be a consistently profitable trader.
| "We are what we repeatedly do. Excellence then, is not an act, but a habit." -- Aristotle |
Trade Smart....
~Duane Gott
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