7 Questions that will reveal to You the truth about Your Trading

You cannot make progress without putting yourself in difficult, demanding situations. It is also difficult to measure and control this progress without analyzing your actions and drawing conclusions. I think this is a truth that every trader knows very well. I also believe that each of us has experienced this truth very clearly the hard way.

When we talk about progress in trading, it is difficult to imagine a development in this field without diligent preparation for work before starting trading. But many of us forget that it is just as important to analyze our actions “after the fact”.

Some time ago I wrote an article about the pre-flight checklist in trading (available here). I have included some important issues for me that I cannot ignore when preparing for trading. Just like a flight safety pilot who is planning to do it in a moment, a trader who wants to keep money in his account safe must go through some necessary checkpoints before taking action. However, it is worth remembering that only full monitoring “before” and “after” allows you to control progress on an ongoing basis, eliminate errors, increase security and increase efficiency.

Evening examination of conscience

I will ask you a question. What trait do you think is most valuable to a trader? Take a moment to answer. I know you can think of many things. I’m sure that each of them is important. If, however, I were to indicate one of the most important, I would mention the consequence.

Now another question. What is consistency when we talk about the profession of a trader? Perhaps you will mention following the accepted rules, acting in accordance with the trading plan, or maybe you will also think about not discouraging yourself from losses and constantly striving to achieve your goal despite failures. You’re right again. These are areas where consistency plays a key role. For my part, however, I would add something else.

Trader’s consistency manifests itself in the constant ability to control one’s actions and in performing activities related to trading, which do not necessarily give the greatest fun or satisfaction, but bring the greatest effects, directly translating into the result. These actions, although inconspicuous, are the key to successful trading.

One of such activities is conducting the aforementioned checklist before starting work on the market. However, this is not the only job for a trader. It is no less important to review the results and course of trading after the end of the trading day. This is where a space for error analysis, progress, and drawing conclusions is created. Contrary to appearances, performing an honest examination of conscience is a difficult task for many traders for several reasons:

  1. Often, after many hours of work on the market, we simply do not want to additionally focus on the analysis of our own actions, the more that it undoubtedly requires a longer time when we want to leave the computer.
  2. It happens that when we earn well, we do not see the need to analyze our day and our market activities, at the same time we diminish the importance of such conduct, postpone it to another moment or allow ourselves to completely abandon it, because we have the feeling of a well-done “job” that does not require deliberation.
  3. When we lose a larger amount, we are often demotivated, after the end of the trade, we do not want to focus on failure anymore, sometimes we do not want or cannot face the truth and point out our own mistakes, resigned, we try to escape from the need to analyze our trading, we want as soon as possible leave the computer to forget about the negative feelings associated with the loss.

Postponing the analysis of your actions “until later” will lead you to a situation where over time you simply forget about important issues related to what was happening during the trade. Until then, the emotions that accompanied you will be replaced by others, the events that mattered will no longer seem so important, and therefore the conclusions drawn on their basis will not be reliable. Also note that keeping such a summary after a given trading period develops systematics, persistence, and also helps to nurture and deepen the aforementioned consistency. In addition, it brings many other benefits that support the achievement of our goals:

  • It shows what mistakes we repeat often and what new ones appear in our trading;
  • Helps to work out solutions;
  • It allows you to identify effective actions and behaviors that are worth repeating;
  • Shows patterns of our conduct;
  • It gives us a picture of the efficiency of our trade;
  • He supports us in keeping statistics;
  • Helps to maintain discipline;
  • It gives us constant feedback whether our strategy is right or requires correction.

We should monitor our own progress “after the fact” not only at the end of the day, but also after longer periods, e.g. at the end of a week or a month. It is also worth noting that after each of these periods of work on the market, the control questions that we ask ourselves should be different. Despite the long-term and obvious trading goals for us (I hope every trader has defined one), our daily, weekly or even monthly goals will be clearly different from each other. For example, if you have established that you want to earn x% in the market each year, it is obvious that this will not be in line with your daily, weekly or monthly goals, which are meant to guide you step by step towards your long-term annual goal.

The question for you is – do you know your short and long term goals? Do you monitor your progress in achieving them? Do you realize that if you constantly miss your weekly or monthly goals, you will most likely never reach your annual goals?

So how to monitor your trading?
What to monitor and with what frequency?

The question of what to monitor can be answered by asking other questions that will lead to the right answer:

First, what makes you better at trading?
Second, what is the measure of your trading success?

In the first case, you can answer – the process. More precisely, the quality of the commercial process. It is he who directly translates into our results. What does it consist of? Everything we talked about earlier in this and previous articles – preparation, attitude, environment, knowledge, previous experiences, behavior patterns, emotional management, individual stages of concluding, conducting and closing transactions, etc.

The quality of the process, which includes the elements mentioned above, leads you to achieve a certain result. The score in turn is a measure of your trading success. If your score systematically leads you to your goals, you are successful. If your result is uncertain, you observe large fluctuations in your bill or you achieve permanent losses, then it can be concluded that some elements of the process need to be changed or improved. It can also be several factors that, as a result of neglect or incorrect approach, prevent you from achieving your goals.

How often do you monitor your activities? It largely depends on the style of our trading. If we trade short term then the frequency has to be higher. However, it is very good practice to examine your conscience after each trading day and the minimum at the end of the month. These are good times for both day trading and swing traders. Monitoring of the commercial process and results should be carried out in parallel, but from my own experience, I believe that the evaluation of the results can be carried out at wider intervals, because it is only the result of a process whose quality affects the results.

Transaction journal

Performance monitoring should be based, inter alia, on transaction log records. The records we keep while trading provide us with measurable parameters that show how we do in trading. At the same time, they constitute the basis for monitoring the progress and quality of the trading process. The transaction log should contain at least the following information:

  • Instrument;
  • The date and time the position was entered into and closed;
  • Order direction (buy / sell);
  • Method of entering into a transaction (manual, pending order);
  • Position opening level;
  • Position closing level;
  • Position size;
  • R / R relationship;
  • Profit / loss on the transaction;
  • Stop Loss Level, if any;
  • Take Profit order level, if any;
  • Prerequisites for opening an order – systems, formations, correlations, the general situation on the market.

    The above list is an absolute minimum of information. Note that basically all of the above data are measurable parameters. Many traders also include information in their trading plan about how they feel about opening, trading and closing. Any such information will always be to your advantage and will allow you to better and more fully understand yourself, your strengths and weaknesses, and thus also correct your methods and behavior.

Using such a prepared diary is much easier to analyze the results at the end of the month and create statistics of your trading. However, in order for progress monitoring to be of real value and to help improve performance, it is necessary to ask ourselves some fundamental questions that also apply to the less measurable components of our success.

Below is a list of 7 questions that every trader should ask himself if he wants to effectively model his trading process, thereby influencing the results, improving the efficiency of trading and actively achieving the goals. It’s important to always be 100% honest with yourself when answering these questions. Remember, the more severely you treat yourself in this regard, the more mistakes and potential blockers you will pick up in your trading.

End of Trading Day Control Questions:

  1. Were all trades in line with my trading plan today? – if not, why and how can I fix this error?
  2. Is there anything I have done in the market particularly well today? – What am I particularly pleased with in my conduct?
  3. Is any of my positive behavior or reaction in the market today worth repeating in the future? – If so, what are they?
  4. What mistakes did I make when trading today? – Are these mistakes that have been repeated in the past? Have I made a new mistake that has not happened to me yet?
  5. How am I going to fix the mistakes I made? – What methods will I use from the next time to prevent them from happening in the future?
  6. Have I been able to eliminate any particular mistake I have made so far from my trading today? – Can I say that I am seeing some progress in this respect at home?
  7. What did I learn about the market and / or myself today – How can I turn this learning into success, starting from the next trading day?