Marcos was a profitable trader, but knew he could do better both with his trades and his trading psychology. He found himself making money on good trades, but frequently giving it back on others, or leaving too much profit on the table. To address his inconsistencies, he began using a straightforward technique developed by sport psychology. Not only did his technical trading improve, he developed more insight into his mental and emotional make-up and how this interacted with his trading.
Are you frustrated by your trading like Marcos? Do you make the same technical or psychological errors over and over? If so, there is good news. A simple technique can help change poor trading habits. After each game, elite athletes review the post-game video to identify areas for improvement. It is the tried-and-true way to develop athletic skill. Traders can adopt this practice to make improvements in technical ability, and, just as important, develop their psychological skills as well.
Like the professional athlete, you want to identify both your strong points and your limitations. Although often overlooked, knowing your strengths is vital in trading. Trades you do well can be a part of your ‘bread-and-butter’ repertoire and taken with confidence. Limitations keep you from trading your best and are areas that can be avoided altogether, or developed into assets. Post-trade assessment is one of the most important tools a trader can use to clarify their assets, identify their limits, and improve. Here are some tips for getting started:
1. Identify Personal Trading Patterns
First, review all your trades. Start by sorting your trades into categories. There are various ways to sort trades. One basic way to sort is simply by winning trades and losing trades.
Once sorted, identify the characteristics winning trades had in common. Were winners taken under certain market conditions or indications? How did you feel about them? Also, note the characteristics of losing trades. Under what conditions were these trades taken? Were they unplanned? Did they break your trading rules? What was your mind-set?
You are looking for patterns that repeat across trades. If winning trades are taken on pullbacks, for example and losers tend to occur on breakouts, then you have some important information. You are now in a position to make positive changes in your trading.
2. Identify Ways to Improve Trade Management
Look at trades you closed and where they are now. Did you close trades too early and leave money on the table or would an earlier exit have been more profitable? Did your emotions or thinking work against you and limit your gains? What can you identify that will help you improve your winning trades?
Use of the post-trade assessment will help develop your ability and skill as a trader. You can make this a more powerful practice by keeping good records. Print charts at the time you take the trade and again when you close it. Keep notes on why you made the trade, and especially on your thoughts and feelings about the trade as you entered and as it progressed until closed. Your notes will help you identify emotional and mental patterns in both successful and losing trades. Understanding these patterns is critically important for your psychological development as a trader.
The simple post-trade assessment tool can be done to both improve your technical skills and abilities, as well as your psychological skills.
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