Monday, June 28, 2010

Critical step...

In my post "My trading method outlined", I neglected to include one critical step. That is, the need to review past trades every month or so. This is a very critical step that lets you know if you have been sticking to your trading plan and how well you have been doing so.

If you have not been sticking to your method this gives you a chance to become more disciplined and stick to your plan. If you have been sticking to your plan and and your performance has been good then great. Your method is working. Do not fix whats not broken!

If however, you have been sticking to your plan but your performance has still been poor then something may be wrong especially if the markets have been performing well. This may indicate that some aspect of your method needs review. It could be stock selection, entry and/or exit tactics, position sizing etc.

All in all this review process is critical as it helps traders to optimize their trading system or method. This review process has assisted me a great deal and lead to turn around my trading performance from consistent losses to consistent profitability this year. For instance, from reviewing my trades, I realised that I am better at trading pull backs than breakouts.

So this completes my trading method outline.

Good luck with your own trading!

No comments:

Post a Comment