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.

If you do some research, you will quickly find out that all famous discretionary traders used volume: Livermore, Darvas, O’Neil and many more. But famous today’s traders use volume information, too: Minervini, Zanger, Ryan …

1. Volume shows greed and fear

The trading volume can give you clues about the greed and fear in a stock or any other trading instrument. An example of this trade model can be found on this BTC to USD website, live.

• If the volume is high on up-days it shows greed. Traders are heavily buying the stock and absorb all possible selling volume.
• If the volume is high on down-days people are fearfully. They sell a lot of stocks and throw their trading positions out of the window.

You can easily determine which side is in control if you look at the volume action. But the volume must be in synch with the price action.

2. Price and volume must be in synch

The best way to interpret volume is to look at the price simultaneously. Huge volume and huge price moves shows clearly which side is in control: Buyers or sellers.

If you see small price moves with high volume, you should be sceptical. Why? Because volume should be in synch with price! If this is not the case, volume should be seen as a warning sign. Maybe somebody is selling into strength or buying falling prices heavily.

Small moves and huge volume is NOT a selling signal, but you should monitor the stock closer.

3. Volume and small caps

Stocks with small trading volume are much more difficult to analyze. Sometimes there is one good volume day, but the other day the stock is crashing on low volume. This happens because there are not enough traders which trades the stock.

If only one mutual fund wants to buy a position in a smaller stock, there is not enough buying power for big trends. As soon as the mutual fund completed the position, the price and volume collapse.

A solution is to wait until there is enough interest and volume in the stock.

4. Everyone can see “monster volume”

You will not believe it, but there are traders out there which buys a ton of stocks in a second without looking at the price. Why? Because it’s their job! If a fund wants to buy a position and makes only money by fees, they can buy without looking at the price. In that situation a stock can explode to the upside with high volume.

Everyone can see “monster volume” in the chart. A 5x, 7x, 10x or 20 times the average volume is clearly visible and shows high demand or selling pressure. If you do some research, you will see that the most powerful trends started with more than 10 times the average volume. Screen for such situations and put the stocks on your watchlist.

5. Excessive volume

Volume is good, but too much volume can be a problem. It’s like a motor which is out of control …

In some special situations all outstanding shares are trades multiple times per day in a stock. That shows a high focus of all traders on that stock. And if a stock is highly in focus and everyone knows about it, there will not be enough buyers left. It maybe will work for some days or weeks, but then the stock has no fuel left and collapse.

6. One day wonders

Besides excessive volume there is another type which I call “one day wonders“. A stock explodes to the upside with huge volume and price action. The next day the stock is doing like if nothing happened: No volume, no price action anymore.

Such situations should make you sceptical. If that stock is the best stock in the world, where are the buyers? Maybe there was just one buyer and you. Normally such a stock will return to the level before the huge price move or collapse if no one is there to support higher prices.

7. Volume in ETFs

ETFs and volume is a different thing as stocks and volume. The reason is that ETFs are based on price movements of a basket of stocks. Even the ETF is traded on piece a day, it can explode to the upside. The underlying stocks determines the price movement of the ETF.

But the volume of an ETF can give you clues about the demand of the ETF or sector. If a sector ETF is traded with high volume, it can show you that the whole sector is on demand.

Of course this is not true in every situation. Sometimes there are large short-sellers in ETFs which hedges their portfolios.

8. Options expiration

A lot stocks are traded by options, too. You know that options have an expiration day. On that day, options are exercised and the option holder has to deliver.

The trading volume is very high on such a day, but price movement can be “normal”. You should know these days and ignore it. Of course this effect can have implications on a stock or the price move, but normally this is just intraday.

9. You don’t see all volume

Today there are a lot of ways to trade stocks. Especially market participants with huge volume uses different stock exchanges as you and I. There are market like OTC, Dark Pools or ECNs. The volume of such exchanges is normally added to the main volume after close.

10. Volume on news and earnings

News and earning reports can influence prices heavily. Sometimes this can be good for you and sometimes bad. But you should watch price and volume closely on such days.

If there is a great earnings report and nobody reacts with price and volume action, you should be sceptical. On the other side, if the market reacts strongly I can give you a clue that maybe more price and volume action will follow.

You must always have in mind that huge and smart market participants are not willing to buy their whole position in one day.

Recommended books

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

[amazon box=”0471668265,0735201811,1118443926″]

Der Beitrag 10 tips to work with trading volume erschien zuerst auf Trading Blog - Julian Komar.

For a lot of people it goes against their beliefs to buy new highs. Why? Because the stock seems to be expensive in that moment. But the stock market works not like a supermarket. Cheap stocks are mostly not a bargain, they are rotten eggs.

The most persuading argument for me to buy a stock on a new all-time high is: What must a stock do if it should move up 10.000% in a row? Answer: It must take out old highs and reach new highs.

Example: Amazon – New highs are buying opportunities

Amazon is one of the most successful stocks in the last years. I put a simple 52 week high line (with a Donchian Channel) on the chart. You can see clearly that every 52 week high was a buy opportunity.

Of course the stock had some seriously corrections, but that’s why you need a trading system with risk management and not only one indicator.

There are plenty of similar charts next to Amazon like Apple, Netflix, Nvdia and many more. All these super stocks have in common that they continuously reaching new 52 week highs and especially all-time highs.

The difference between a 52 week high and an all-time high: Overhead resistance

Not in all cases is there a difference between a 52 week high and an all-time high. Because if a stock is priced on an all-time high, it is automatically a 52 week high. The only difference is “overhead resistance“.

With overhead resistance I mean all potential seller that would sell a stock at higher prices. These traders had bought a stock at a higher price and now their trading positions show a loss. If the price returns now to a higher price they maybe close their position for break-even. The problem is that a seller is a seller and they are able to stop a price move.

If a stock is priced on an all-time high, the stock has “blue sky potential“. That means every trader has a position that shows a profit. No one is urged to sell because the trading position hurts.

But there are situations where the overhead resistance is absorbed by other traders. In these situations the stock quickly moves to new highs and afterwards maybe to new all-time highs.

All-time high trends lasting longer as you think

A stock with “blue sky potential” can trend longer as you think. If there is no serious selling pressure, the stock can move a long time until it hits resistance.

Stocks on new all-time highs have no technical resistance because there is no trading history. A trader cannot look back and search for important price barriers other similar. The only situation where an all-time high stock can reverse is if the bias in the stock changes. This normally takes a longer time and is caused by bad news.

You will see a change in an all-time high stock quickly. Normally it is gapping down or moves quickly to the downside. In that situation new overhead-resistance is created.

But if there is no bad news or anything similar, the stock can move much longer as you think.

Bull markets and new highs

Of course all upper examples are selected in hindsight. But normally bull markets produces a lot of similar examples.

It’s not possible to catch every superstock but you may ask yourself: Where do I want to fish?

• Do I want to fish in a sea with small, stinky fishes and where my odds are bad to fish a big one?
• Or do I want to fish in a sea where some really big fishes are swimming.

I prefer the last one.

So you can see that the important question is about the odds. That’s what stock selection is about. If you combine multiple criteria, the odds will increase and you maybe fish a really big fish out of the sea of stocks.

Should I trade in the weekly chart because of 52 week highs?

You can do it if weekly charts are your preferred time-frame. But it’s not necessary. I personally prefer the daily chart. And you should not blindly use a 52 week high as a trading signal.

The upper examples should give you an idea about stock selection. It’s much easier to trade a stock on a new all-time high. The selection is easier because the stocks are obviously visible, there is no overhead-resistance, often smooth trends emerge and the moves to the up-side are faster. That’s why I look for stocks on new all-time highs.

Recommended books

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

[amazon box=”0071494715,0071614133,0071807225″]

Der Beitrag Buy high – sell higher: What must a stock do to rise 10.000%? 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.