You’ve probably heard the old saying “What gets measured gets improved,” and it is true, you know.
When you keep accurate records of your activities in the markets it can really help you spot patterns in your performance. Your records will show you any areas of weakness. And they’ll also show you areas where you are naturally strong.
Providing you keep accurate records.
No conveniently leaving out any losing trades taken in error or other blots on your performance!
(I’ve seen all those tricks before.)
And guess what… once you can clearly see areas that need improving you can introduce small micro-habits that help you do it (more about them coming soon). Or you can adapt your trading strategy in such a way that it completely steers around any areas of natural weakness.
Don’t Fight The Tide
And when it comes to your areas of natural strength, those are the areas to really capitalise on.
That’s where you can expand your strategies to make the most of your natural talents.
So say, for example, you’re looking through your records one day and you notice that the trades lasting many hours were the ones that challenged your discipline. You tended to get restless and fiddle around with your stop loss too early on these trades. You rarely captured the lion’s share of profits that were available and even took early losses on some of these trades just because they were dragging on for too long.
The short term trades on the other hand, the ones that lasted an hour or less, were handled with perfection. You had no problem sticking to the strategy and actually performed better when things were moving fast and held your focused attention.
Well, instead of fighting the tide you might tweak your trading campaigns to focus on your true strengths: the short term fast trades.
You might adapt your strategy in some way so that it actively seeks the shorter term opportunities and culls the slow grinding trades.
One way you could do this might be to introduce a ‘time stop loss’: you exit all open trades at the 60 minute mark or something like that.
Anyway, tweaking and streamlining strategies is a job for another day, but the point I’m making here is that you’ll only see the areas to work on if you have the hard data to hand.
What records to keep?
Here’s what I suggest…
You keep two main documents: a Trading Journal, and a Record of Results.
1) The trading Journal: this is a creative and organic record of the actions you take during the trading day. It’s also space to record your observations and feelings experienced during the day. Probably best to do this with pen and paper. Have a nice notebook open on the desk next to you so you can quickly jot things down.
2) The Record of Results: this is a clinical and scientific record of all your trading activities. Probably best kept as a computer spreadsheet: entry price of the trade, exit price, reason for exit, record of profit or loss etc… You can lift the information from your trading journal to fill in your record of results at the end of each trading session. This data set will become VERY useful to you over time.
I think record keeping and using the data to improve your trading probably deserves a full session in its own right so I will cover this in more detail in a future eletter.
But for today, start keeping good records of the things you do.
Once you have this information captured it can’t go anywhere. You can then get to work on analysing it and making the right ‘tweaks’ to your trading. Improvements in your performance at this stage are almost unavoidable!