It is very useful to constantly review past trades and think about what could have been done differently to evaluate one's trading performance. Uninitiated people may think most people always have winning trades. But that's not how real trading works.
Here are some tips to help you improve your trading evaluation strategy. The following pointers highlight common trading mistakes and explain how you can avoid them.
Build a trading diary
Trading diaries are easier to create than ever before. You probably place your trades on a desktop machine, tablet or smart phone, which all offer you a way to make quick notes about why you bought or sold that market. Snapshotting the chart is as easy as clicking a few buttons. In reviewing what you have done, all of this information will help you see if there is anything you can do to improve your future strategies.
Evaluate winning as well as losing trades
Assuming you are doing this as you go along, you need to schedule some time to sit down and review your trades. Weekends can be a good time to do this away from the excitement of the market. Keeping track of winning and losing trades is important. Would you do anything differently if you faced the same market today? To avoid this mistake in the future, is there a common mistake that you need to focus on?
Make sure you study your trading charts
Many of us make the same mistakes when we first start trading - and perhaps you can spot some of them in your own trades. Going against major trends is a common mistake and temptation. Trying to pick tops and bottoms in the markets is human nature, but it isn't consistently profitable. Printing out charts when you place trades can make spotting this tendency easier. Taking this information into account will help you make the right trading decisions in the future. When you are forewarned, you are forearmed!
Consider where you are placing your stop-loss orders
Many people make the mistake of setting very tight stop losses. No one likes losing money but sometimes, placing a stop loss too close to your entry point is self-defeating as you are not giving the market enough time to prove you right. If the trade had had more breathing room, would it have worked better? If you conduct regular reviews, you will be able to detect small tweaks to your strategy that can make all the difference between winning or losing trades.
Summary of trading evaluations
One final thought: it’s important to not be too critical of yourself when it comes to trading losses. No strategy or system is right all the time, and there will always be losses. Regular reviews of your trading performance can help you reach this goal by making sure the amount you make when your trades succeed is larger than the total loss.
TopTech Digital/B4Signals is not a broker dealer or financial advisor. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by TopTech Digital/B4Signals or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
TopTech Digital/B4Signals does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and TopTech Digital/B4Signals shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
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Chuck Edwards
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