Trading/Investment Review - kennynah May2010
The way to improve, is to get better at what you do. Doesn't that sound just rhetorical?
Employees receive periodic job performance reviews by peers and/or their supervisors. Behavioural science professors from ivy league schools write thesis about this subject. MNC HR departments implement such reviews. Employers spend resources and must be getting some real benefits out of such performance reviews.
So many people can't be so wrong about the need to review work performance.
For those who trade, especially professionally, there's no such formal review system. We are on our own. We have no work peers nor supervisors. There isn't such quarterly or yearly performance reviews.
So, how do we know if we are trading optimally? How will we know if we could have traded better or avoided those mistakes? We won't, until we actually review our trades.
The only way to fully understand our trading performance is for us to review our past trades. But unlike corporate reviews, done quarterly or yearly, we must do this more frequently. It is individual preference as to how frequent this happens. The objective is to stamp out any bad trading habits, acquire good ones and improve as fast as I can. It's my money on the line, not some shareholders' money.
It is said that we make better traders, when we spend more time thinking than actually trading. I think, there's some truth to this. Afterall, repeating bad habits frequently, wont make trading badly more profitable.
How should we go about this reviewing process?
Personally, I like doing this every week, usually over the weekend. I go through my trading log, capturing entries and exits, profits and losses for each individual trade.
I reflect on each of them, recalling the reasons and the accompanying emotions that motivated me to open and close off those positions.
I not only focus on what went wrong but also what went superbly well.
Sometimes, when I screw up big time along the week, I stop trading momentarily. I find a quiet spot and immediately reflect the entire episode. After Action Review is best served when the memory and emotions are still lingering. I pen them down. It could be "lacked discipline" or "snatched price" or "impatience" or "there was no signal to initiate", etc... I remind myself not to repeat those mistakes.
When I pen these trades, I also relook at earlier weeks' entries. The purpose is to check if I have recommitted earlier spotted errors. I am aware of my personality to know that I repeat errors. So, I have to make every conscious effort to eradicate them.
By reviewing past records, I get to reinforce my correct trading habits too. I get more motivated to seize those successful trade setups.
Summing It All Up
In a gist, we must review our previous trades periodically, so that we can improve on what works, remove bad trading habits and hone our overall trading skills. No one will sit us down to check whether we achieved our KPIs. We are our boss..we check up on us, ourselves.
There's an adage "It takes 3 days to learn to be bad, it takes 3 years to acquire good traits". It has to be a continuous review effort, if we hope to benefit from this exercise.
Happy trading
The way to improve, is to get better at what you do. Doesn't that sound just rhetorical?
Employees receive periodic job performance reviews by peers and/or their supervisors. Behavioural science professors from ivy league schools write thesis about this subject. MNC HR departments implement such reviews. Employers spend resources and must be getting some real benefits out of such performance reviews.
So many people can't be so wrong about the need to review work performance.
For those who trade, especially professionally, there's no such formal review system. We are on our own. We have no work peers nor supervisors. There isn't such quarterly or yearly performance reviews.
So, how do we know if we are trading optimally? How will we know if we could have traded better or avoided those mistakes? We won't, until we actually review our trades.
The only way to fully understand our trading performance is for us to review our past trades. But unlike corporate reviews, done quarterly or yearly, we must do this more frequently. It is individual preference as to how frequent this happens. The objective is to stamp out any bad trading habits, acquire good ones and improve as fast as I can. It's my money on the line, not some shareholders' money.
It is said that we make better traders, when we spend more time thinking than actually trading. I think, there's some truth to this. Afterall, repeating bad habits frequently, wont make trading badly more profitable.
How should we go about this reviewing process?
Personally, I like doing this every week, usually over the weekend. I go through my trading log, capturing entries and exits, profits and losses for each individual trade.
I reflect on each of them, recalling the reasons and the accompanying emotions that motivated me to open and close off those positions.
I not only focus on what went wrong but also what went superbly well.
Sometimes, when I screw up big time along the week, I stop trading momentarily. I find a quiet spot and immediately reflect the entire episode. After Action Review is best served when the memory and emotions are still lingering. I pen them down. It could be "lacked discipline" or "snatched price" or "impatience" or "there was no signal to initiate", etc... I remind myself not to repeat those mistakes.
When I pen these trades, I also relook at earlier weeks' entries. The purpose is to check if I have recommitted earlier spotted errors. I am aware of my personality to know that I repeat errors. So, I have to make every conscious effort to eradicate them.
By reviewing past records, I get to reinforce my correct trading habits too. I get more motivated to seize those successful trade setups.
Summing It All Up
In a gist, we must review our previous trades periodically, so that we can improve on what works, remove bad trading habits and hone our overall trading skills. No one will sit us down to check whether we achieved our KPIs. We are our boss..we check up on us, ourselves.
There's an adage "It takes 3 days to learn to be bad, it takes 3 years to acquire good traits". It has to be a continuous review effort, if we hope to benefit from this exercise.
Happy trading
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