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One of the fastest ways to grow as a trader is to record and review your trades – both wins and losses.
You will learn from the wins whether you got lucky or did the right thing.
If you did the right thing, the review will be further etched in your memory chart pattern and actions you need to take to repeat those transactions.
More important is what you will learn from the losses.
You must determine whether the loss was a proper loss or an improper loss.
An improper loss is when you make a technical error or wrong decision.
You may have made a transaction without all the activation criteria being met.
You may not have adjusted when you should have, or you may have adjusted too often, or you may not have exited the trade when you should have.
Or a whole list of other reasons.
A proper loss is when you did all the right things, took the trade when you should, and the loss was within expected limits.
This happens; It’s a normal part of trading to have decent losses, as long as you don’t have too many of them.
By recording each trade, you can measure the types of wins and losses.
There are four categories of results for each transaction:
- Small victories
- Small losses
- Big wins
- Big losses
You need to eliminate the latter – the big losses.
Big wins may or may not exist depending on your specific strategy.
If you are trading different strategies, they should be indicated so they can be categorized later.
For example, you may have condor iron trade, journal transactions, 0-DTE transactionsstock trading etc.
To be profitable, the dollar amount of your small wins plus big wins must be greater than the sum of your small and big losses.
Note that I said dollar amount and not the number of wins and losses.
One can have a 70% win rate and still be unprofitable, especially if they don’t eliminate those big losses.
Some will say, “Oh, well.” And move on.
This is good because it means that you had properly sized the trade and accepted the possibility of this loss before starting the trade.
You can continue your work, keeping rational thinking, as the losing trade does not affect you emotionally.
However, it can be improved if you want to improve as a trader.
And no matter what level you’re currently at, everyone can have room for improvement.
What is best is to analyze this trade to see if you have followed the trading plan and executed the trade correctly.
If you discover that there were mistakes, that becomes your learning point.
Mark that in your diary.
If you are busy trading the market right now, record your trades and do your analysis after the market (preferably on the same day so your memory is still fresh and accurate).
Even if you found that you followed the strategy exactly and didn’t make an execution error, there are still additional things you can learn.
For example, let’s say you’re betting on a down move in a DTE zero picks game.
You go back to the point in time to look at the 2 minutes candlesticks to check if the right decision was made.
Yes, the technicals show that the price is in a downward trend.
It seems right, but then you look at the hourly candlestick chart: Oh no! The higher time frame shows an upward trend.
No wonder the price suddenly went up and the trade-out stopped.
Reviewing a trade can lead a trader to improve his trading plan.
In this example, they may have added an additional dot to check the higher time frames to ensure that they are also in line with the direction of the trade.
This was just one example. Many similar points can be learned if we go back and look deeper.
OK, I’ll give you more examples – as more examples might convince you to analyze your trades.
A trader saw that most of the wins of the last 100 iron condors came from the longer iron condors and the amount he won was much larger.
A hundred iron condors?
Yes, assume this trader has been trading for many years and recorded all those trades.
By recording all these trades and performing a statistical analysis, the trader knows which iron condors are most profitable.
By knowing which strategies are more profitable, one can do more of them and eliminate the ones that perform poorly.
This translates directly into higher P&L.
Assume that a non-directional journal transaction has failed.
Looking at the candlesticks, the underlying trend was currently trending with large candles.
Now, the trader realizes that he should not start this kind of trade when the price is trending and wait for the consolidation phase.
While I think analyzing losses is more important, it is still beneficial to analyze your wins.
Was the win due to a lucky move in the market?
Or was this move a statistical advantage predicted by your strategy?
Did you take a profit too early?
Money left on the table?
This is a lesson if you later see that many of your wins could have gone further and made more money if you had held onto them longer.
Mark that in your diary.
Perhaps you would like to test what would happen if you adjusted your strategy to have a higher profit target.
If you find that you did everything perfectly and the transaction worked as planned, then reviewing the transaction will imprint in your memory what a good installation looks like and how it should behave.
Makes it easier to locate the setting next time.
It would be good to put it in your memory bank.
Some traders will collect screenshots of well-executed trades in their journals, playbooks, or other electronic organizers for future reference.
Here’s an example of a detailed analysis of a bullish trade in Microsoft when it made a reversal after hitting a major support/resistance zone:
Adding annotations to your screenshots is a good idea.
Have you ever seen a seasoned trader be able to pick and choose, most of the time, which trades to enter and which trades not to?
The marketer may not even be able to articulate why he likes this but not the other.
This is because they have seen so many winning and losing trades that their subconscious brain has learned the difference between them.
This phenomenon is described in Malcolm Gladwell’s book, “Blink: The Power of Thinking without Thinking”, where he gives examples of art experts who can quickly identify fake art, even though they cannot explain why they believe the work was fake.
This shows how experts can develop an intuitive understanding of their field through years of experience and exposure.
How long does it take to become an expert? In his previous book “Excellent”, Gladwell said it takes 10,000 hours.
Make your screen time count. Study your trades.
And maybe you can become an expert faster than 10,000 hours.
We hope you enjoyed this article on how to control your transactions.
If you have any questions, please I am sending a message or leave a comment below.
Trading Vault!
Disclaimer: The above information is about educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with stock trading options. Any reader interested in this strategy should do their own research and seek advice from a licensed financial advisor.
