Winning is a Habit: Record Your Trades
For some reason most novice traders begrudge the fact they need to keep high-quality trading records. It’s another trap created by believing that trading is easy and every time we put a trade on it’s going to gang busters or, even if this one doesn’t, the next one will for sure. I just need to watch my bank balance going up and up! That’s all I’m interested in.
When I work with traders, I hear it all the time, why would I waste time on keeping all those records? Or, the platform I use does it for me, why would I bother to do it again?
Another reason for this apprehension (that amateur traders have about keeping trade records) is the fact that the results of our records represent the black and white, unemotional, truth of our trading AND that can be scary.
Well the reality is it’s probably one of the main distinctions between professional traders and amateur traders.
You think about traders working for a firm or a fund. Their trades are completely scrutinised by their superiors. The performance of their trading is analysed based on their trading records. Their entire employment is governed by them. Do you think they would be trading diligently?
For individual traders, trade recording is one of the most underutilised tools available to them.
That’s right, instead of looking at trade recording as a chore; you should be looking at it as a fundamental tool you can use to improve your trading. The correct use of trade recording is the main driving force of improvement.
For instance if you give me 20 of your recorded trades, I can tell straight away weather you will be a successful trader or not. There’s no need to keep bumbling along, wondering if you’re ever going to make it as a trader. I can tell you straight away, just by looking at your past trades. I can also tell you exactly where you’re going wrong and what you need to do to fix it.
You know if you haven’t got 20 past trades recorded in some form, then what does that say about your trading aspirations?
But…Hey Simon gives us break I’ve only just started trading!! I haven’t had 20 trades yet!!
They don’t have to be live trades. Paper trades should be recorded and analysed just like live trades.
Isn’t it a better concept to paper trade, record and analyse those trades and then modify and improve technique according to the results of the analysis?
Most people don’t want to go through that process. They just want to jump straight in and start making money…. and lots of it. Well the statistics tell the story; Less than 10% of the individual traders who come to the market, actually last long enough to learn to become successful traders.
Noticed I said learn to become successful traders.
Trading is a skill. It’s behaviour. It can be taught. Assessing and modifying your past actions refines your trading process.
“Some of the best lessons we ever learn are learned from past mistakes. The error of the past is the wisdom and success of the future.”
Your records should be a complete log of all trades plus involve current account balances which are used for correct capital allocation.
There are two components when you are recording your trades.
1. When a trade is opened the position is should be recorded, as an open position. This is to remove the allocated funds from our trading bank.
2. When the trade is closed the information is entered which closes the trade and adjusts our trading records and balances accordingly.
This readjusts our total balance for correct allocation of funds to other trades.
Here are some things that you may want to record, depending on what you are trading;
Account Balance, Risk Allocation, Open date, Ticker Symbol, Type (Call, Put or stock), Strike, Expiry date, Option Price, Number of Contracts, Price stops, Profit targets, Total Trade Outlay, Close date, Number of Contracts Closed, Close Price, Amount Received, Brokerage Costs, Profit/Loss on Trade, Return on Trade, and Return on bank.
So correct trade recording helps us allocate the right funds to each trade and then can be used as an analytic tool to identify and repair possible flaws in our trading routine.
Make trade recording and evaluating a habit in your trading.
Simon says Winning is a Habit.
