Some people won’t tolerate failure when they’re a customer or dealing with employees. But they’re quick to cut themselves slack when it comes to their own trading mistakes. That’s why one of the best resolutions you can make in 2020 is to hold yourself accountable.
Learn from Mistakes
It might be true that everyone makes mistakes — in the plural. However traders often make the same mistake — in the singular — over and over. They might rush entries or fail to hold winners or hold losers, pointlessly hoping for a turnaround. They might ignore key signals. They might do some or all of these things, again and again.
Bad trades are often examples of the same pattern. Fortunately, since they are patterns we can learn from them and create rules to avoid repeating the same blunders.
Trading Rules Are the Goal
Whichever way you hope to make money, you need a plan. There are certain things you will do, and other things you won’t do. It’s like owning a restaurant. You do sell hamburgers but you don’t sell life insurance. Period.
So if you’re a day trader, you do open and close positions in the same session. You never keep them overnight. Swing traders hold for weeks and don’t sell too quickly. Everyone needs risk management to stop losses when markets go against them. Period.
Know your business model and your plan. And then stick with it by following your rules. This might not sound like a lot of fun and games. But it’s a lot better than losing money.
Seven Steps to Accountability
Let’s run through the seven steps I follow when conducting a post-trading analysis.
- Collect as much data as possible. In particular identify the setup of each entry, your expectation and your time frame. Were you being arbitrary? What was the S&P 500 doing at the time? Did you make an obvious mistake?
- Record your 10 best and 10 worst trades. Print out the chart or take a screenshot so you can remember later.
- Identify your strengths and weaknesses in an unbiased manner.
- Create rules that you can realistically follow.
- Ask yourself how you can be more consistent and less emotional. Be honest!
- Keep summarizing and reviewing the main takeaways.
- Maintain a trading journal to keep you on track in the future.
A Clean Slate in the New Year
Remember, everyone tries to make money in the same market, but few pull it off regularly. Successful traders develop a process that works consistently over time, while amateurs mostly focus on short-term results.
The first step toward becoming a professional is thinking like a professional. And the first step to thinking like a professional is examining your past mistakes and resolving to stop making them in the future.
Now’s the time to wipe the slate clean and start again. Make 2020 the year you start learning from your past instead of repeating it.
