I think every trader can relate in terms of their initial motives to begin trading. I hear two very common reasons for traders starting out. They either believe that trading will be an exciting activity or that trading will be an easy and quick way to make money. Similarly, I first became interested in trading because I thought it would be a nice way to make money while attending college. It sounded like a great gig! I wouldn’t actually have to do any hard work because my money was working for me. So I started buying some stocks based off of analyst recommendations and news articles. Unfortunately, analysts on CNBC only tell you when to buy and not when to sell. I was in a trade based off of someone else’s idea, so when things went wrong I had no idea what to do. After losing some money I decided it was time to do my own due diligence and craft my own trading plan.
After nearly two years on this journey my trading plan is finally coming together. It was definitely hard to refine the abundance of information in the beginning, but I feel as if the dots are finally starting to connect. As the dots have started connecting, my plan has taken the discretion out of my trading, evolving my plan into a much more systematic one. I have found that the more work that I perform to take my own judgments and decisions out of my plan the better. I have made it very easy to find a legitimate trade set up, trade the set up and to exit when the times comes. But even more than the actual process of trading, my analysis is extremely organized. Reviewing your past trades is the only way that you can truly improve as a trader. It started by first enhancing my trading log, and let me say that it has done wonders. I have worked hard to standardize my trades, which has resulted in increased consistency and simple, yet effective, post-trade reviews. Despite every trade being unique, they are all logged exactly the same way.
As I mentioned earlier, the more work done to have a plan going into a trade the better. Removing senseless stupid human errors from a trading system can go a long way. One last thing I would like to mention, planning your trades does not mean anything if you don’t trade your plan! You must have the discipline to follow the system, that is key. Overall, this process begins with building a robust trading system firsthand that you believe in and not relying on others to get by. As I always say, it is hard enough to know what the market is going to do, make sure you know what you are going to do first!