Trading Pal Blog

The trading log from your broker tells you precious little nothing about the reasons why you entered and exited a trade. Keeping track of that information is paramount for improving your trading performance.

Trading is a game of bluff. You are betting that an equity will go up and for a trade to take place you need to find through the stock exchange another soul who believes exactly the opposite. They might need to sell for personal reasons but if they were convince the stock will continue to shoot through the roof they probably wouldn't sell - at least not at the current price...

Trading is an emotional game and in order to reign in your temperament you need to document objectively the reasons why you enter and exit a trade.

What information should then be recorded?

What trading signal did you use? Name the indicator or oscillator. Do not change indicators throughout the duration of the trade - that's a cardinal sin!

Was your trade conditional on the equity hitting a particular price level?

Upon entering what are your exit stop and your target stop orders? How long do you expect the trade to last in order to reach that profit?

Paste a copy of the current chart with support and resistance levels.

Did you do any fundamental research on the stock? Is it sensitive to any type of news (ie forex jump at changes in interest rates). Was it the subject of a broker's recommendation? What do you know about the potential of that sector? Did you read the company's annual report?

Of all the possible instruments to trade why did you pick that one? (People often wonder about that one once the trade has gone pear shape later on...)

Was it a tip from a friend? Do you have information not available to the general public?

How did you determine your position sizing? Do you not risk more than 2% of your trading capital on any given trade?

Is this trade independent of other trades you have currently opened? Can a change in the price of crude oil or the price of gold adversely affect several of your opened trades? How can you protect from that? Do you know about hedging?

Do you buy and sell all your shares at once or do you gradually build up and decrease your position?

Did you calculate the brokers' fees and your tax status in regard to dividends, etc...

That's it for now. You get the idea. You will be amazed how you discounted the importance of some of these things in the past.

Looking back give yourself a score on the execution of your trade. Did you panic and closed the position in a hurry only to see the stock reach your target two weeks later? Did you safely bail out according to your rules and avoided a blood bath? Did you execute entry and exit with total detachment for a well earned profit?

Why not compare your trades with what an automated system would do in the same circumstances. Check out http://TradingPal.net

Add comment