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Many traders struggle to make consistent profits. And so they keep looking for another strategy, another course, another trading robot, …. just ANYTHING that might improve their trading.
And that’s why many traders spent more time and money on strategies, eBooks, indicators and courses, until they have no funds left to trade.
But as you know, it doesn’t fix the problem!
In the following article I want to show you three steps to improve your trading. In fact, I believe that by following these steps and you can dramatically improve your trading in the next 24 hours!
Step 1: Record Your Trades
Whether you are trading on a simulator or already trading with real money: You MUST record your trades.
Traders treat trading as a business and they know their numbers.
Just think about it: If you are running a business, you want to know whether you make money or lose money. And if you are making money, you want to know WHY you are making money, e.g. what products or services provide the highest profit margin, what products and services sell best, etc.
And if you lose money in your business, you need to figure out why, too!
Same in trading. You MUST keep accurate records of all trades that you placed, whether you took them on paper during backtesting, in a simulator or live in your account. Here’s the information that you need:
- Date: Just enter the date on which the trade occurred.
- Market / Symbol: Record the symbol of the market you are trading, e.g. ES, YM, AAPL, EUR/USD
- Long / Short: You need to record whether you entered a long or a short trade.
- Entry Price: Record the entry price.
- Entry Time: Record the entry time.
- Exit Price: Record the exit price.
- Exit Time: Record the exit time.
- Profit / Loss: Record the profit or loss that you made on this trade.
- Strategy Used: If you are trading multiple strategies, record which strategy you used for this trade.
- According to Plan?: Record whether you took the trade according to your plan or not.
- Comments: Write down any comments about this trade, e.g. “Great trade. Followed all my rules” or “Forgot to check the calendar and traded right into a report.”
The best way to record your trades would be in an Excel spreadsheet, because then you can sort your trades for the next step.
Step 2: Analyze Your Trades
Now comes the fun part: You need to analyze the trades to see which trades are making you money and why you are losing money.
Here’s what you should analyze:
- Are there certain markets in which you MAKE money? Are there markets in which you consistently LOSE money?
- Are there certain times of the day when which you make/lose money?
- Are there certain days of the week when you make money? What days of the week are you losing money?
- Take a look at your profits and losses. Are there any BIG losses that stick out? If so, take a look at your comments. Could these losses have been avoided?
- Are there certain strategies that LOSE you money? Any strategies that MAKE you money?
- Do you trade according to your plan? Do you notice that whenever you don’t’ follow your plan, you have more losses than normal?
- When reading through the comments, do you notice any particular pattern, e.g. “moved the stop too early to b/e” or “took profits too fast”?
When using Excel, you can quickly analyze your trades according to the criteria mentioned above.
Step 3: Modify Your Trading Plan
Based on the analysis you did in Step 2, modify your trading plan.
As an example, if you make money during the morning session, but you lose money in the afternoon, just focus on trading in the morning.
If you make money trading ES, YM and NQ, but you lose money trading TF, stop trading TF!
If you make money Tuesdays, Wednesdays and Thursdays, but you lose money on Fridays, stop trading on Fridays.
If you make money with Trading Strategy #1 and Trading Strategy #2, but you lose money with Trading Strategy #3, stop trading strategy #3!
You get the idea, do you?
A Personal Experience
When I moved from Germany to the US to become a trader, I struggled in the first few months. But then I started to analyze my trades exactly as outlined above. And I found out a few things about my trading:
- I made money on the trades that I placed during the morning session, but I had an unusually high amount of losing trades during the afternoon session. So I stopped trading in the afternoon, and even today I’m just trading in the first two hours after the US stock markets open.
- I had an unusually high amount of losing trades on Fridays. As a result, I usually don’t trade on Fridays.
- I discovered that I had more losses than normal when trading the e-mini NQ. Therefore I stopped trading NQ an focused on the markets that made me money: e-mini S&P, 30-Year Bonds, Gold, Crude Oil and EuroFX
To date, I am surprised how many traders don’t keep accurate records and don’t even know what’s causing their profits, and what’s causing their losses.
If you have been placing ANY trades, whether on paper, on a simulator or live, then you are sitting on a gold mine of information. If you follow the steps above, you can dramatically improve your trading in a matter of hours!
- Do you keep accurate records?
- Do you know your numbers?
- Have you ever analyzed your trading like this?
Leave a comment below and let me know!