Here Is The Meat Of A Trading Review
I did it. And I am feeling good about it. I got rid of the “Profit & Loss” section from the spreadsheet that I use to review my trades as well as every other detail that may hint to how much money I’ve made or lost in a trade. So, now I am using two different documents, one is just for keeping records of the trading results on a daily basis (it does contain the actual P&L) and the other one is for reviewing my trades. Why did I do this? Let me explain it furthermore.
The short answer is focusing on the “dollars” result of one trade doesn’t really matter. P&L is just a simple consequence of the trading management. We aren’t really in control of it. In fact, what we can control is only how we handle those trades. Because the main goal of the trading review process is to implement a set of actions to improve a trader’s skill set.
Each morning, prior to a new trading day, I invest some time (usually it takes no more than half an hour) to review all my trades from the previous market session. In this way, I find it really effective to have meaningful thoughts about my own decision-making process while in a trade.
Here Are Three Aspects To Take Care Of In A Review
I’ve rebuilt my own trading review spreadsheet from scratch because I want it to contain only what I really think is added value to my trading performance moving forward. Here are the three aspects that it contains for each trade I take:
- The entry, stop, target and closing prices. In particular, the entry and closing prices are the ones that I executed the trade at while the stop and target prices where the ones I was basing my trade plan upon (if one of those were missing, there would have been something to think about already);
- A simple “Yes/No” answer to the question “Did I follow the plan?” to force me to think about always having a plan to trade and to record the executed trade;
- A more descriptive question that goes like this. “What could I have done better on this trade?”. Beware that it applies to both winning and losing trades because there is a lot we can learn from winning trades too. In fact, in some cases a winning trade could have been way bigger if the trade would have been managed better. In other cases, winning trades may be the result of just “luck” and if that’s the case, here is the place to understand it and to prevent from happening again. Here is the best place to propose corrective action to be implemented in future trades also.
In other words, maximizing the learning experience from all trades is what every trading review process should be all about. Do yourself a favor, stay away from those profit and loss numbers because there is something more valuable that you can do today that will ultimately help that same number going up over time, sooner than you may think.
“Never let hard lessons harden your heart; the hard lessons of life are meant to make you better, not bitter.” ― Roy T. Bennett
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