Let’s say that you have been trading for a while. Let’s say that your results have been less than stellar and that this is because of problems that show up when you are trading. These problems could be a combination of any of the ones that I’m going to list below.
I’m not going to get into the details of the problems that I’m going to list. I only list some to give you an idea of what can cause problems in our trading in order to get to what this post is really about. Also, this list is not extensive. See below:
- Over trading
- Not adhering to stop losses / trading without stop losses
- Closing trades to soon
- Battling with emotions like fear, greed, anger, etc
- Patience and discipline
- Not following your trading plan
- Impulsive trading
- Revenge trading
- Trying to copy others
- Risking too much
- Strategy hopping (nromally the results of all the other point above)
We all know what problems we are experiencing in our trading, so feel free to add your own to the list.
In the above list are some of the many problems that’s causing traders to lose money and abandon trading strategies. If you’ve traded long enough and you’re still struggling as a trader, chances are that you have had experience / are still experiencing some of these problems. Maybe it’s time to try something different? Why not try something different? After struggling for some time and you’re still determined to trade, try to give the following exercise a shot.
- Pick a strategy that resonates with you.
- Commit to a certain number / sample of trades – I suggest no less than 20 – where you will follow the rules of your strategy for each of those trades.
- Risk a very small percentage of your account on each trade; it’s about taking each trade according to your rules without being scared and not about how much you win or lose. Express how much you risk as a constant like R for example and your wins as a multiple of your risk. For example, if your risked R on a trade and made two times that on a single trade, it means your profits for that trade is 2R.
- Record / journal each trade.
- Evaluate afterwards.
What would be great is if your strategy was backtested, but as long as you know it has an edge in the market / markets you are trading it should be okay for the purposes of this exercise. It will depend a lot on how big your sample of trades are and over how long a time period you’ve done it, but the first thing I want you to notice is that there should be an improvement in your trading results. The results might not shoot the lights out, but at least there should be an improvement. Also, when evaluating your trades, it should be much easier to compare different trades (the winners and losers) as all setups are the same, making it easier to see where you can improve. Then you will notice that the winners and losers are all random; you might start off with 3 losers then get a win, another loss and then 2 winners for example, but still be okay in terms of your account balance depending on your reward to risk ratio and trading style.
To give you a taste of how the pro traders trade out there and how they conduct their operations is the point of this whole exercise. They stick to their strategy and don’t abandon it after a couple of losses as they know it will make money in the long run. They don’t take big risks, but know that their profits will accumulate over time. They journal their trades and evaluate the winners and losers to see where and how they can improve.
If you are anything like me who have experienced most of the above trading problems and abandoned good strategies because of it, I hope you will try this exercise and see what happens. What do you really have to lose?
Hope you found some value from this post and exercise, and thanks for reading.
Thanks and Regards,
Trading SOS SOS