• Close a half position if the stock falls back below the breakout level.
• Sell a half position if the price drops below your entry price.
• Close your position after the prices goes sideways directly after the breakout for more than 10 days.
• Sell a half position if the relative strength is going down or sideways although the price is going up!
• Close your position if important support levels are broken or it closed below the EMA 21 or EMA 65.

These are just examples, but they help you to remove emotions from trading.

I have a clear goal: I want a small average loss over all my trades. The smaller the average loss is, the larger my profit. If you sum up all your losses and divide that by the number of losing trades, you calculated your average loss. That should be much smaller than your average profit.

The opposite to holding losing trading positions is holding your winning positions. The larger the gains, the more you are tempted to take profits. But this is not the right strategy! You must have small losses and really big winners. That means: Letting your profits run!

My rule is: As long as the stock behaves right, does what I expected and no sell rule if fulfilled, I don’t touch it! If the stock reached new all-time highs, pulls back to natural reaction levels and shows high relative strength, I leave it alone. If the stock starts to show weakness, I am watching the price behavior closer. The more weakness a stock shows, the faster I sell it. Here is the link between selling weak and holding strong stocks.

To do this you need a different mindset and that will not appear over night. It takes many years to develop. You have to work on your mindset every day until it changed and became a natural behavior. Set up rules, backtest them to build up confidence and follow them with discipline. That help you to cutting your losses short and letting your profits run.

Der Beitrag Selling weak stocks and holding strong stocks erschien zuerst auf Trading Blog - Julian Komar.

7 things I am monitoring actively

1. I do my analysis of stocks and the general stock market everyday. I go trough my watchlists and ask myself: Are the stocks I am monitoring strong? Do they lead the market? If yes, it’s a good sign that my stock selection process is working.
2. How many stocks do I have on my watchlist? Am I adding new stocks to my watchlist everyday or every week? If I add a few stocks every week to my watchlists, it’s a good sign because the chances increases to catch a good winner.
3. How do the leading large cap stocks look like? Are they close to all-time highs or are they broken down without any recovery? If all charts look like a catastrophe it shows me that nobody is buying glamour, large cap stocks (like $AMZN, $AAPL, $NFLX etc.).
4. Do the indices show a bottoming pattern? If yes, it’s a good sign. Especially if the updays show higher volume.
5. Are the indices in a long-term uptrend? You can have a look at the weekly and monthly chart. If you have a solid uptrend, the odds are higher for a continuation instead of a reversal. Maybe a correction is just a small pause in a long-term bull market.
6. I monitor the % of stocks above the 50 MA and 200 MA. They gave me clues about the broad trend of the markets. In a strong bull market, everything is above the 50 MA and 200 MA.
7. Are the indices in synch with each other? You always want to see a broad market trend. That means small and mid caps should lead. Use the Russell 2000 for an analysis. This index should be in synch with the large cap indices like Nasdaq and S&P 500.

Make sure you look from different angles at the market. But most important for me is my own watchlist and my stock screener. If everything on my list looks good, the chances are high that I can make money. That’s my niche and I try to know my niche as best as nobody else.

Buy small test positions first

Don’t jump back into the market with both feet! Always buy small test positions and increase them if they show a profit:

• If you normally buy 10% positions, buy 5%.
• After they show a profit and moved up a few percent (f.e. 3%), add another 5%. Now you have the full position.

Of course you pay a higher average price, but see it from the risk side: If the market is ripe, you will save a lot of money because your losers are smaller. Often it takes multiple attempts to get back into the market and reducing losses is the key. Lose small!

Don’t underestimate the psychological side

As I wrote above, sometimes it takes multiple attempts to get back into the market. If you have 5 losses in a row it will have an impact on your confidence. The smaller the losses you have to bear, the less the damage of your confidence as a trader. Losing 0,5% of your capital is better than 1% or more.

Do everything to secure your “mental capital”. It’s much more important as your monetary capital. If the odds are increasing to make money, you must be able to pull the trigger again. In that situation your mindset must be in a good shape.

Der Beitrag How to restart after a correction in the stock market erschien zuerst auf Trading Blog - Julian Komar.

To be a successful trader means to find an approach with mirrors your own identity. That’s very hard, because the most traders start their career when they are young. Often they have not the needed self-awareness and are in the middle of the journey to find out more about themselves. How do you want to know what suits you at that point in time?

What’s my personality?

It all begins with some basic assumptions. Look into yourself and ask yourself:

• Do I have fun with analytics?
• Am I a solver of abstract problems and challenges?
• Do I like programming software or mathematical algorithms?
• Am I an artist and do I like music, arts or graphic design?
• Is economics and economic relations one of my favorite topics?

This is very basic, but a point to start with. You must find something which suits you and where you already have some experience with. From biologic point of view: Where did you already build paths in your brain?

In that situation books about success and self-improvement can help. They often contain methods to find your personal strengths.

If you don’t work on that topic, you will never become a successful trader because you will never find an approach which suits you.

Forget predefined trading methods

I am very sure that the most traders will fail if they use trading systems from other people. They don’t mirror your personality and that’s the point where you start to sabotage it.

It doesn’t matter if you use an automatic trading system or a discretionary trading approach. If you can’t accept the outcome and decisions you will start to sabotage it. That’s why it’s so important to find a compatible approach.

You must start the journey of finding your own approach. In that journey trading approaches of other people can be an inspiration. Sometimes they match your personality to a high degree and you only have to adjust just a small parameter. In other cases you have to develop a complete trading system by yourself to accept it completely.

There is no shortcut

Finding you own trading style is a difficult thing and there is no shortcut. Often it means to get familiar with yourself and your identify.

Mistakes are unavoidable on that path. But every frustration and mistake will bring you closer to your goal. It is important to reflect your mistakes and your actions to learn from them. And be sure: Your journey is never finished because your personality will change over time. I am sure that you will be a different trader in 10, 20 or 30 years.

There are some sources which helps a lot:

• Books and videos about success, psychology, motivation etc.
• Biographies of other people.
• Spiritual books, videos and courses.
• A good mentor or coach which helps you.

In a nutshell: Use everything which helps you to know more about yourself!

My personal experiences

If I look back I can’t say exactly where I started as a trader. My interest in trading got stronger over time until it started to be my passion.

At the beginning I struggled a lot and tried every approach and every trading instrument. One month I was a pure technical and the other I was a fundamental technical trader. The next months I traded stocks, the other I traded certificates (popular in Germany). I tried different subscriptions of German trader platforms and newsletter …

But when I look back, certain things always accompany my trading career:

• Cutting losses with a stop-loss order always made sense to me. Maybe that based on my thinking about a businesses. You must make bets, but the bets must be small enough not to lose everything you own.
• Trading stocks. Although I traded every trading instrument on earth, I tended always to trade stocks. I like to understand what the company is doing and I have a strong attraction to technology and innovation. I have a lot of knowledge in this field and can assess how important a special technology is.
• Technical analysis. I am a very visual person because I started in the graphic design business. That means I have a trained eye and can quickly find patterns inside a chaotic image. I also like music very much. That makes me familiar with patterns and rhythms.
• Rule based discretionary trading. Although I make some analysis, this is not my strength. I believe in experience, craft and rules. Rules helps me to improve my work and experience helps me to find rules. I can develop simple own screener and indicators, but I can’t develop automatic trading systems. That’s why I always used a rule based discretionary approach. I tried some more systematic approaches in the past but I can’t stick to them. It doesn’t feel right and was not compatible with me.

I never would say that I am at the end of the journey. I always have fields where I struggle with. In the last months I tried to find out how important fundamentals are in my approach. Today I can say: Not so much. But I am very sure that there will be some challenges in the future. As long as my personality growths and changes I will be in the journey to find my own trading style.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”007174908X,1118273052,0062315005″]

Der Beitrag The Hardest Thing About Trading … erschien zuerst auf Trading Blog - Julian Komar.

What’s a trading mistake?

A famous trader said that everything is a mistake until you follow your rules. Sounds simple, but it isn’t easy.

A losing trade is not automatically a mistake. Only if you broke your rules and the trade is a loser, it is a mistake. But winning trades can be a mistake, too. In that situation you only had luck.

In short: Trading mistakes are based on not following your trading rules. Besides that there are mistakes in order execution or technical mistakes. For example you can make a mistake while entering an order. But in that situation your process or routine is not good enough, because normally you should double check your orders.

Why reducing trading mistakes?

Mistake mostly cost money! It’s unimportant if it’s a losing trade or an execution error. If you reduce your mistakes, you will save money and improve your trading statistics.

In addition you will strength your mindset and improve your psychological situation. You gain self-esteem and you can rely on yourself.

10 tips to reduce trading mistakes

Here are a few tips how to reduce trading mistakes. They will help you to improve as a trader financially and psychologically.

1. Make mistakes transparent: Collect every trade in your trading journal and diary. Analyse them afterwards and find improvements.
2. Create a ruleset matching your personality: A lot of mistakes occur because the trading rules are not compatible with the trader. You have to change this! The rules must use your strengths and not your weaknesses.
3. Build and improve processes: Everything you do as a trader should be based on processes. Only if you have a defined process, you can repeat it again and again. Over time you must improve that processes with learnings and new information.
4. Use automation: You can automate a lot in trading, f.e. scanning for stocks, alarms or entering orders. This helps you to reduce mistakes.
5. Work on your mindset: A lot of mistakes are based on wrong imaginations or values. In example: If you think that a trader has to be in action all the time, you will force trades. Instead you could have a different picture of a trader as a focused and calm person.
6. Checklists: A checklist can help you to stick to your rules. It’s simple and very effective.
7. Use statistics to find mistakes: If you collected hundreds of trades in your journal, you can use this data to find mistakes. Often mistakes have something in common. Analyse your journal and find the commonalities of your mistakes regularly.
8. Score trades afterwards: If a trade is closed you should not only put it in your trading journal. Review the trade and score it: Was it a good trade? Was there a mistake? Were all rules fulfilled? Would you make this trade exactly again?
9. Review your trading journal with a second person: This helped me a lot! I sent my trading journal to a previous mentor and he reviewed my trades for me. He found a lot of things to improve and commonalities of bad trades.
10. Quality instead of quantity: Work on your quality everyday! If you improve your quality, it’s only a question of scaling to make a lot of money. Reduce bad trades, select the right time to trade and select only the best trading candidates. Then increase position size and use your edge.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”007174908X,1118936817,0996307931″]

Der Beitrag How to Reduce Trading Mistakes: 10 Tips erschien zuerst auf Trading Blog - Julian Komar.

Below you find my top 10 learnings. I collect that wisdom from my mentors, Market Wizards and other traders. They helped me to get better and better as a trader.

1. Chart your own equity curve

This is a recent advice I learned from Olivier Tischendorf. He wrote a great article about that: How To Profit From Charting Your Own Equity Curve.

If you chart your own equity curve day by day you will have a direct feedback of your trading. You know exactly how you perform, when it’s time to be aggressive and when it’s time to step on the break.

More information in my own article: Learn to manage your own equity curve.

2. Sell a trade quickly if it drops below the breakout point

I am convinced that a trade should be a winner directly from the beginning. All my huge winning trades shows that characteristic. If the trade instead is falling back below your entry point you should sell it quickly. Something seems to be wrong.

Such a radical trade management is not an approach for everyone. You must be very disciplined. But the good thing is you can lower your average loser a lot.

Learn more about it: An example in trade management – the breakout stop.

3. Trade only the strong stocks

There was a time in my trading career where I trade stocks which dropped and then started a new trend. You can name such stocks as reversal stock or turnaround stocks. There is nothing wrong with this approach but it’s not mine. I was never good in it.

Instead I learned to select leading stocks which are strong, printing new all-time highs and show strong volume characteristics. It helped me a lot!

4. Focus on a trading niche

Of course there are traders out there which are flexible and can trade any market. But that’s not me! I believe in focusing on a trading niche. That’s the only way you can gain a lot of experience.

I focus mainly on momentum stocks and leave other markets for other traders. Rarely I trade forex, commodities or indices.

5. Day traders, swing trades and scalpers do not make more money as other traders

A long time I believed that fast traders are making more money that slow traders. But always if I looked into a trade record of a day trader or scalper I noted that’s not true! In a lot of cases the long term oriented traders made more money. How is it possible? Simple: 5% a month is 5%. The approach to create 5% is not important.

That does not mean that there are no good day traders out there. It only means that you don’t have to be a day trader to make a lot of money.

6. Excessive risk-takers are mostly bankrupt

I always was blended by social traders which had accounts with profits of 400% or 1000% in a short time. I always asked myself: How did they do that?

One day I saw a social trading account of such a trader. It has a draw down of 90%! That’s pure gambling. Of course there is a possibility to recover from that. But in the most cases they close the account and start a new one.

7. Clean and simple charts are the best

If you believe you have to make complex technical analysis, you are wrong. I found out that the best trades have very simple chart patterns. There is no volatility and huge price swings. Follow Patrick Walker on Twitter and you will learn a lot about “clean and simple”.

8. Do everything to protect your confidence

Today I know how important confidence is as a trader. But there is not a universal truth what confidence means. Maybe for you it’s your rule-set and blindly follow them. For another trader it’s his ability to select good stocks. The only thing which all have in common is that they believe deeply in their principles. And that’s why you have to defend your principles and believes against any threat.

There are times when my equity curve shows high volatility. In such a time I start to close positions. Yes, sometimes they still fulfill all rules and maybe I am cutting potential profits, but my confidence is more important. If you have a deep draw down you don’t only lose money but mental capital, too! Ed Seykota said famously: You have to know when it’s time to break your rules.

9. There is intuition in trading

There is a myth in trading that you should act like a robot. There was a time when I believed this myth, too. But today I look differently on that thing because I read a lot about the brain and intuition.

Intuition developed with experience. The more you learn about a thing the more intuitive you get about it. It’s like driving a car or cooking. You know exactly what to do without thinking about it deeply. That same experience you can have in trading, too. If you look at hundreds of chats a week, you intuitive know which one looks good and bad.

10. Working on yourself is the best method to mastery

As I started to read books about motivation, psychology, self-development, philosophy and time management I not only got better in my job, I got better as a trader, too. The basing principles of success are the same in any job. You doing outside of your job influences your job.

I absolutely recommend not to read only trading books. Start to read books about self-development and -management, too. You will find a lot of inspiration and you can transfer a lot of methods into your trading world.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0735201447,1848549253,014312417X,0062315005″]

Der Beitrag The 10 Best Trading Tips I learned from other Traders erschien zuerst auf Trading Blog - Julian Komar.

Normally new traders start trading in bull markets. Bull markets attract people to get involved in the stock market because everything looks easy. The markets only know one way and every pullback get bought. It’s easy to buy a stock and the gains flow into your account …

But if the first correction of the market starts, the most new traders lose all their gains and more. Why? Because they did not learn anything about the markets, position management and risk management. You cannot get enough experience in just one market cycle.

I personally get involved in the markets around the 2008 crash and earlier. After some years I started to get seriously interested in the stock market. I know what it means to get trough difficult periods. But my experience is just a blink in the eyes of market participant with 20, 30 or 40 years experience.

10 rules and experiences for difficult market environments

Here are 10 rules and experiences which I think are important in a volatile and difficult market environment:

1. Cash is a position: To stay in cash and on the sidelines is a deliberated position. It’s a tool in the traders toolbox to avoid losses. Of course you cannot make any money, but you will easily outperform the markets.
2. Going short is different than going long: Emotions in volatile and difficult markets are different. The fear of losses are different from the greed of gains. The rules to play the short side are different and maybe you need different strategies. Fast snap back rallies will throw you out of your position. In addition the chance-risk-ration of the short side is limited: A stock cannot go down more than 100%.
3. Not all stocks are a good short: Shorting stocks can be dangerous. Imagine you short a biotech company and good news appear on the screen. The stock opens with a gap of 85% or 120%. The loss you realize is terrific. The same happens if a company get bought out. Especially if you short a cheap stock and another company pays a high premium. My rule: Avoid cheap stocks and biotechs, trade small short positions.
4. Inverse ETFs helps to spread the risk: To decrease the risk of a single stock you can trade ETFs. There are inverse ETFs which follows a basket of stocks or an index with a negativ correlation. That means that if f.e. the S&P 500 falls 1%, the inverse ETF will rise 1%. There are inverse ETFs on the most sectors, forex and commodities. But make sure that the ETF you buy is liquid enough (>25k volume in average per day).
5. Look at other markets: If you are an experienced trader and you know your edge, you either stay out of the market or you look at other markets. There are several markets out there: Forex, commodities, bonds. Some of them have a correlation to the stock markets, others are independent.
6. Monitor your trading journal: You will not perform superb in any market cycle. The trading journal and your taken trades shows how your strategy performs. If you see that you have a negative outcome of the last 20 trades, scale back. You approach seems not to be working in the current environment. That’s why monitoring your equity curve and trading journal is essential.
7. Find a mentor: There are a lot of traders out there which have long experience in the markets. They went trough multiple market cycles and are still here today. Find such a person and apply to a mentoring program. Even if you will not make any profits, you will profit a lot from the thoughts and tactics of the mentor. My two mentors in the past and today were the best investments I took!
8. Defend your equity agains draw downs in any dimension: The most important thing is that you defend your equity curve against a big draw down! If you equity goes down 5% or 10% it is possible to get to new highs quickly. But if you have a draw down of 30% or 50%, it is very difficult. You will need a long time to see new highs. That’s why it’s important to have the most possible small draw down. Do anything what’s necessary: Small position sizes, stay out of the market, sell quickly or give up trading until a better environment appears. But never let your capital erode!
9. Never buy bottoms: After weeks or months out of the market, it will start to itch in your fingers … You may think that some stocks are oversold or see bottom formations. But I can say from my experience that from one night to the other a gap down of 5% or more is possible. If big funds must liquidate their positions, they sell without any other thoughts. You have to be patient until a lot of stocks build strength, make new highs and the bias in the markets changes. That needs time!
10. Do something else: I have some other activities besides trading. I also think that this is very important. If you look at the markets all the time, you will do stupid things. It’s much more effective to make a plan and execute the plan. So go out and find other activities to spend you time … As Jesse Livermore famously said: There are times to be in the markets and there are times to go fishing.

The 11. rule …

There is one hidden rule I want to write about: Psychology. The most new traders fail because they think trading is easy and get punched in the face if the time gets difficult. In that second they learned that the markets are bad and no one can win.

The thing that they don’t grasp is that successful traders started out the same way. The only difference is that they react different to the hurt they got from their first punch.

Unsuccessful traders give up quickly because they are only interested in excitement and the money. Successful traders are interested in the challenge and the game itself. That’s just a different view of the same thing. But the first trader will never get back to the markets like a child bitten by a dog, the second will return because he is interested in animals and learned that they are not always kind and cute.

So ask yourself: What type of trader do you want to be? I can give you a tip: Be the second, buy a lot of self-help and motivation books and bridge the time between the end and start of a bull market.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”007174908X,0735201447,1118273052″]

Der Beitrag 10+1 rules for the current market environment erschien zuerst auf Trading Blog - Julian Komar.

But how to gain this confidence in your own trading? Is the only way to wait 20 years and make thousand of trades?

In the last months I thought a lot about “mental capital“. With mental capital I mean the trust and confidence in your own trading. This can increase and decrease, depending on your experiences in the market. Example: As big loss can decrease your mental capital which leads to a more defensive behavior. The opposite is possible, too. A big profitable trade can boost your confidence and leads to over-trading.

It always comes back to trading psychology … If you call it mental capital, trust or confidence is irrelevant. But I made some experiences which I want to share with you.

5 points to build up more confidence in your trading

Here are some points and experiences which helps me to gain confidence in my trading:

1. Charting your equity curve: This helped me a lot. It brings transparency in your trading and shows the results of your action. Especially if you have an edge in the market it will boost your confidence because your equity curve is going up!
2. Positive outcome: If your trading is profitable it helps you to get more confidence. It’s not important how much you are making, it’s more important that your trading process results in a positive outcome. If you are not profitable, change or optimize the process.
3. Tweak your approach: You must tweak your trading approach until it matches your personality. F.e. I implemented a scaling out tactic because I hate it to give back too much of my open profits. This leads to a smoother equity curve and increased my trust.
4. Rules and best practices: Always if you see that a rule helps you in your trading, you build up confidence. Especially risk management rules are a good example. I hate too loose much of my capital in draw downs. That’s why I have risk- and money management rules to reduce my position size and cut my losses strictly. I have a high confidence in that rule-set because it prevented me of big losses and draw downs.
5. Have a positive mindset: You must work on your long-term mindset. If you don’t think that you can make it as a trader, it will block you form a positive outcome. You must develop self-confidence and a positive self-attitude. Read books about success, motivation and role-models. Look how they did it and look that they startet the same way as you …

Why confidence is so important

I startet with the points to build up confidence, because I gives you some practical examples. But the you must understand the background why confidence is important, too.

In trading all comes down to the psychology. Markets and trader are driven by emotions. This is true for systematic trader, too. There are hundreds of ways to sabotage automatic trading systems. But especially as a discretionary trader you have to know how your confidence influences your trading.

I would say: The more confident you are, the better are your results. Why? Look at these points:

1. You will take your signals, because you know that it will end in a positive outcome.
2. Rules will be accepted and followed. You saw that they had a positive influence.
3. You are in a state of “flow” where everything is easy and fun.
4. Every trading opportunity is recognized and evaluated. You take only the best situations because it matches your plan.

You can see that confidence has a direct influence on your trading. This is why you have to maintain it and never decrease it. The decrease will come automatically in that times if your trading is not working.

But be warned: Too much confidence is a problem! You want not to be over-confident, because it will bring you to fall. With a too high confidence you will sabotage your plan, make too big bets and think everything will go on and on. But the markets and trading are never linear. One day the mood of the markets will change and your trading is not working (for some time).

5 points to maintain confidence in your trading

Maintain and build-up confidence is nearly identical. But to maintain confidence your had to build it up first. That’s why you know to do it.

Here are some tips for maintaining confidence in your trading:

1. Look back at your results: Analyse your equity curve and trades. Why did it work? What was the situation in the market where your trading worked? You must be clear about the time your trading approach works.
2. Trading is a craft and skill: Be sure that the mindset of a trader is adaptive. It’s not rigid to one market or approach. If the stock market is a bearish situation look at other markets. Can you apply your trading approach to forex, commodities or fixed income? What’s about inverse ETFs?
3. Distract yourself: If you have no edge in the market, do not apply your trading approach. I know, I want to be in the markets all the time too, but this leads to losses. That’s why I do other things if my trading is not working: Reading, writing, analyzing, other businesses … If you try to trade a trading system with no edge, your trust in that system will be pulverized over a short term.
4. Have role models or mentors: Especially if you are a beginner, you need role models or a mentor. They solved a lot of problems and overcome a lot of situations. You can profit from their confidence and experience.
5. Work on your mindset: Have a long-term perspective. Think about the next 1000snd trades and 20 years. I know it’s hard, but you will not make millions of dollars in a short time. Of course I want to do this, too, but that’s not how trading works. If you want to have the chance of a million dollar with one click: Play the lottery! Instead read some good books and blogs about motivation, success and self-help.

Like everything else you have to find your own way. I stumbled about a nice quote: I don’t think trading can be taught, but it can be learned (source unknown). I am sure that everyone who want’s to be a market wizard will find a way. And she or he will find a way to build up and maintain confidence in their person and trading.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0735201447,1118273052,0996307923″]

Der Beitrag Build and maintain confidence as a trader erschien zuerst auf Trading Blog - Julian Komar.

If I talk to traders, I often hear that they have no diary, journal or any other notes. But why? Trading is not different to f.e. professionell sports, where they conduct post video-analysis and have many other tools. Or look at professionell cooks. They make notes all the time about new recipes and what was good or bad.

There is only one reason why some traders do not have any notes about their trading: They do not take it seriously.

I have 3 tools which helped me a lot to get more insight into my trading. They also helped me to improve and get better as a trader. Of course I reached not my final goal, but I am sure that I will do and the tools will help me.

The trading journal: Statistics and insight into your trading

It is so simple: Collect every trade you made in a big spreadsheet. In addition you must collect every piece of information which can help you in future. The goal is to have data for a post analysis of your trading.

There is a reason why a lot of trader do not have a trading journal. It objectively confronts you with trading mistakes and your real outcome. If you produce multiple losses in a row you have to write down every trade and detail. But it will help you in the long-term to make progress and learn a lot about yourself.

Some data I collect in my trading journal

My trading journal is nothing more than a long spreadsheet. I collect the following information about my trades:

1. Number: This is a continuous number of my trades. It can help you to link it to other notes you may collect in a text file or any other application.
2. Buy and sell date: Here I write down when I opened the trade and when I close it.
3. Duration: I apply an automatic formula to calculate the difference between buy and sell date. It is interesting to make an analysis about the duration of your best/worst trades. The duration of bad trades should be as short as possible.
4. Currency: If you trade different currencies, you should write it down. Afterwards you can analyze in which currency you made the best trades. If you trade only one currency, remove this column.
5. Instrument: Here I write down the ticket symbol of the stock or instrument.
6. Type: Long trade or short trade.
7. Number of shares: This is the number of traded shares.
8. Entry price: If you have multiple entries, you can write down the average price. It makes sense to collect very single entry price. If you want to make a post analysis of a single trade, you can see exactly where you entered.
9. Exit price: Collect the prices where you exited a trade. It can be an average price, too.
10. Initial stop-loss: I write down the initial stop-loss price. This can helps to make an analysis if your stop-loss is too far or to close.
11. Stop-loss or exit type: Here I write down how I exited the trade. There are some defined parameters: Initial stop-loss, trailing stop-loss, break-out stop-loss, manual. I do not have take-profit targets. If you use take-profits, you can add that category to the list.
12. Highest high/lowest low: This is the highest high price (long trade) or lowest low price (short trade) while the trades was open. This information helps you to see if you give back to much profit until your stop-loss level is reached.
13. Fee: How much fees took the trade. You can build a sum afterwards or calculate your average fee.
14. Risk: This is the amount of risk. Normally it is 1% of my closed capital.
15. Risk original: This is the amount of risk in the base currency of the instrument.
16. P/L: Here I write down the profit/loss of the single trade in my trading account currency.
17. PL/L in R: I always analyze and look at my trades in risk-multiples (R). This helps me to get a different perspective on my trading. It helps to avoid the emotional money perspective, too. Here is how you calculate the risk-multiples: Profits / risk.
18. Comment: This is an important column. I write down the reasons for the trade and why I exited it. In addition I write down what should be improved in hindsight.

More helpful information

I experimented a lot with other data and information. If I add a new value to my spreadsheet, I go trough all previous trades and add the information.

For beginners I recommend to collect some more information. It helped me a lot to take screenshots from the entry/exit, important events during the holding period and more textual notes.

In the past I had a big Evernote file about every trade I made and added the checklist of the trade, make notes about my feelings and expectation. As I said: It is extreme helpful for beginners and if you start a new trading system.

But if you trade the same approach for some time, you can leave some informations out. Every trade of the same approach follows the same rules. That’s why I only collect the information above in my spreadsheet today. But if I would start a new trading approach today, I would start to collect much more data about it.

The trading diary: Checklists, emotions, trading actions

Most people know diaries from the childhood or movies. You try to write down what you have done today or how you feel about anything. But if you are an adult, it fulfills another role.

Every professional who tries to change something, should write a diary. Why? Because you reflecting yourself and your actions. Of course it must be done honestly. If you lie at yourself, it can’t help you.

I wrote a trading diary from the first day. It makes perfect sense to my. The diary changed over time and I adjust it sometimes to match new goals.

How you change a behavior with a diary

My diary is a mix of checklists and free texts. It is the framework for my daily trading routine and guides me.

The layout of my dairy follows a specific goal. If I want to change a special behavior or want to emphasize a special point in my trading routine, I change the layout and content.

An example: If I want to make sure that I always set every alarm for a potential trade, I add it as a section into the dairy layout (Did you set every alarm potential trades? Yes/No).

Over time the checklists and reflection of your change will help you to change your behavior. It changes the structure of your brain and the new behavior becomes natural. Then you can take the next goal and include it into the daily routine with your diary.

What’s in my trading diary

Here are some elements which are in my trading diary today. But this is my personal diary. You should adjust the layout and content to your goals.

1. Did I read the diary entry from yesterday? Yes/No. This is the first question. It helps me to focus on my trading and resume my thoughts from yesterday.
2. Did I read the improvement list? Yes/No. I always have points for improvement. These are included into a list which I read everyday to remind myself about it.
3. Changes of trading positions. Here I include a screenshot from my current portfolio. It shows the changes of my positions.
4. Total positions/Positions with open risk/Open risk in %. I always focus on risk. So I track how many open positions I have and how many of them have open risk. I include the open risk in percentage related to my total capital. Over time you get a good feeling how much open risk you can handle.
5. Positions with profit/loss. This is also a mirror of my current portfolio. I track how many positions with a profit or loss I have open. If there are more losers than winners, something is wrong and I maybe have to adjust my portfolio.
6. More than x positions with open risk? Yes/No. This is a question I want to remind myself about. I want to make sure that I don’t have to much open risk. The value must vary with your personal risk parameters.
7. Results of the last 4 trades. Positive/negative. That question helps me to focus on how my trading is working currently. If my last 4 trades produced a loss, it is a sign that my trading is not working good at the moment.
8. Maybe reduced losing positions? Yes/No. This is something were I am working on and implemented new rules. To remind myself about the change and to learn the new behavior I included that question.
9. Maybe took profits? Yes/No. Same as the previous question. I want to learn new rules and that’s why included that into my daily routine.
10. Adhered to my improvements. Yes/No. Did I recognized and adhered all improvement points? There is usual no “No” to this question. If I violate a point, I write it down what went wrong and why.
11. Set all alarms and noted all potential trades? Yes/No. Because I am a part time trader, it is very important that I am prepared for everything. This is why I remind myself about that step in my daily routine.
12. Charted my equity curve? Yes/No. This is a reminder to make sure I charted the change of my equity curve.
13. Estimation of current market situation. Bullish/neutral/bearish. That question helps me to get a better feeling for the markets. I have no special rules for that. Because I am going trough hundreds of chats per day, I get a good feeling about the market situation. In addition the change of my portfolio is helping me to answer this question.
14. Estimation of risk. Aggressive/neutral/conservative. It is an estimation about the risk level I want to have in the current market. This question is linked to the previous one. If the market is not good looking, I want to have only a conservative risk. But if there are several very good setups and stocks making new highs, I want to be aggressive.
15. Duration of trading routine in minutes. Over time you get a good feeling about your trading and the market situation with that question. I experienced that if my trading routine was short there is nothing todo and the market is not in a good mode. If my trading routine starts to take more time, the market situation is getting more interesting. It also helps you to limit your time. For me it makes no sense to spend more time with trading as necessary. The opposite is true: The more time I spent, the worse are my results.
16. Free text. Mandatory! This is the most important part. I write down everything which came into my head: Feelings, market situations, changes in trades, my behavior … I am very honestly with myself. But be aware: Do not write badly about yourself and your trading. Try to be objective and positively. This should help you to change and improve your confidence in your trading. Everything you wrote down is stored in your brain and your subconsciousness. So be friendly with yourself.

The free text part is the most important part

As I wrote at point 16, the free text part is important. I use them daily in my trading routine. Sometimes I know exactly what I want to write down because it’s in my head before. Then I open my Evernote trading diary and start typing.

It has not to be a lot of text, but it should address the important things of your day. I normally write about a specific trade, the market itself or what I done wrong. But I also include ideas, improvements or sometimes screenshots.

For me it is important that the trading diary should help you to change. If something makes not sense, remove it. It is much more important to have a daily routine then to produce a lot of content. Start small and adjust over time.

The chart and rules book: Your trading plan

Some years ago I was not a big fan of a written out trading plan. Why? Because I thought that I just need all the rules and setups in my head. But that changed …

Today I see my trading plan as a collection of rules and best practices. My thinking is that trading is more a craft than an art or a science. But this is just my thinking and you could have a different view on this.

Collecting charts like game moves

I am a big fan of annotated charts and I collect them in a presentation file (like PowerPoint). It’s like a book where you collect your best moves and analyze what’s behind it.

If I see a good chart (stock or index) I make a screenshot and annotate it with comments. My goal is always to learn something. It could be a missed trade, a real trade I made or good/bad examples.

Sometimes I go trough the file and remove some charts and add new one. This is a living document and I want to make sure that it contains only charts which are matching my rules.

The rules part

Written out rules have an advantage: You can always read them and reflect them.

Especially because I am a discretionary systematic trader, I have a ruleset which guides me in my trading. The ruleset contains rules and best practices about selecting stocks, entry/exit, risk management, position management and market behavior.

I make sure that I regularly recap this document and internalize the rules. Sometimes I learn something new or write down new best practices. It is a living document, too.

Does the document need a lot of pages? No. But I make sure that I always understand the content and know exactly what it means. It’s not a rough collection of text fragments, but it is a file for me. It’s adjusted to my personal style. So if I would give it away, not everybody could understand the content.

Final thoughts

I made the experience that it is essential to find a process which suits you and not everybody else. That means that also your tools matches your personalty and are compatible with you.

Only you can find a way and daily trading routine for you. I just can give examples how I do this. But in the beginning I also adopted routines and tools from other trades. But after a while I drop them. The reason is simple: It was not mine. It was always a torture to work with them. So I develop my own. That was the only thing which worked …

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0996307931,007174908X,0132157578″]

Der Beitrag 3 trading tools for faster learning: Journal, diary and chart book erschien zuerst auf Trading Blog - Julian Komar.

The most people want more. They want more from everything they can get: Time, money, food, houses, cars, love and so on. But we know that it’s not possible without giving up something else. That means: To have more money we have to give up time or energy or … It’s always a trade between two goods.

But there is one thing to consider. You can get a lot from one thing if you focus on it. Why? You spend all your energy on one sector. This is a big trade-off but in the end you get more. A lot of successful companies do that. In addition you find the saying “less is more” in many self-help books.

Focus on a small niche and reduce complexity

Trading is not different from the rest of the life. If you want to master something, you must have a deep knowledge about it.

In my trading journey I learned this the hard way. At the beginning I was doing everything I could do. I traded stocks, commodities, forex, certificates … But this was just distraction.

After some time I discovered that I could build much more knowledge and experience if I focus on one thing. I started to focus on only stocks and my trading improved.

Why did my trading improved? Simple: It reduced the numbers of trades I made. And it helped me to focus on situations where I have an edge.

If you trade multiple markets (stocks, commodities, forex etc.) you have to build up knowledge in all of them. You must consider a lot of dependencies between the markets. This can lead to situations where you increase your risk instead of decrease it. The reason: Some trading instruments have a dependency, f.e. Gold vs. USD, EUR vs. European stocks and so on.

To make this more complicated: The dependencies between trading instruments can change. So you can see: This is too complex to manage, especially for a beginner. The only solution is to focus.

Becoming an expert in just one niche

If you focus on a niche, you have an additional edge. You get a much deeper knowledge and experience. With experience you can develop something like intuition.

For me intuition is nothing more than deep knowledge and experience combined. You can apply it without active thinkings. It is engraved in the structure of your brain. It is engraved so deeply that it influenced your feelings. You know it if you feel that something “is not correct”. That only means that you saw the same situation a thousand times before and now your brain sends you a signal.

This  intuition or deep knowledge is linked to the hours of learning. If you spend 1000 hours to learn and repeat one thing you have a deeper knowledge about it. Your brain is trained and build the neural paths to handle that situation perfectly.

If you spend 1000 hours to 4 different things, you only spend 250 hours per each. That means you have less knowledge about one of the 4 things.

Now you could argue that all markets are the same, because they are based on price. Yes, that is correct. But there are small differences of the price-movement of these markets.

On a macro level all markets looks the same. But if you want to master a market, you have to look at the small differences. Remember: A master knows his area in every detail!

What does a niche looks like?

I started as a “jack of all trades”. Then I reduced more and more … I focused on only stocks, reduced my style to just one trading method, concentrate on only US stocks, sliced out the high potential/grow stocks niche, focused on mostly small- and mid-caps … This all helped me to make progress as trader.

It is funny, but the more I reduced and focus, the more progress I made!

If you look at your own trading, ask yourself: What can help me to make progress? This has a lot to do with your strengths and what you like. In the end you must do everything to increase your confidence in your trading. And if your trading method is perfectly fitted on your strengths and what you like, it increases automatically your confidence in it. Why? Because it reflects your personality.

Here an example from myself:

• I like stocks because there is a real supply and demand. You can see the volume and price-action.
• There are many sectors. So you can trade different trends inside the stock market and you can see the flow of money from one sector to another.
• You can trade stocks with a small and big account. The fees are low.
• The movements in stocks can be fast. I like that!
• There are real companies behind stocks. Especially I like technology companies with new today unknown products or services.
• I like to discover and search for stocks which matches my criteria. It is an endless “detective game”.
• You can apply screener on it and filter the markets. I have knowledge about programming. So I can apply it.
• With stocks you only trade small sizes and you can spread the risk between multiple positions.

The upper things are all embedded in my trading methods. I discovered them in the last years where I look at myself and ask me: Where are my strengths? What do I like? What do I think that markets work?

Don’t get me wrong. I am not a fundamentalist. The opposite is true! I make all my decision on price and volume. But it gives me additional confidence if a stock has an interesting story and background which is attractive to investors.

Putting it all together

The journey starts with an analysis of your current trading. If you collected data about your trading, you can take it as a starting point.

If you find out that you have a lot of different setups, trade multiple markets and make tons of trades, there is something wrong. Step back and ask yourself: What will happen if I remove something? What have my bad trades in common? What have my bad trading times in common?

In the most cases you will find out that reducing helps. If you master one thing perfectly the result is better. Think about a carpenter that creates tables. If he focus to create only one type of a table perfectly, he will make more money. Why? Because he has more knowledge about it and can produce a better quality. In addition the more experience helps to reduce the costs.

The same is true for trading:

• The more experience you have in one thing, the more you can pick the best setups and trading environment.
• You can reduce the time you spend trading because you will find the setups faster.
• The number of bad trades will be reduced dramatically.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”1118273052,0132157578,0996307923″]

Der Beitrag Finding your trading niche erschien zuerst auf Trading Blog - Julian Komar.