As we all reflect on 2014, it is important to ask ourselves what we learned from the choices that we made while trading. The best way to do this, is to choose your most successful trade and your worst trade of the year. By dissecting the specific actions you took during your trades, you can increase your profitability and capital in the upcoming year.
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Your worst trade:
- Did you trade the actual price action or just your opinion?
- Were you trading with a stop loss? Did you honor your stop loss or let a small loss turn into a big one?
- Did you fight the trend in your time frame?
- Did you try to front run an actual signal before it triggered?
- Were you trading with a bias that made you see what you wanted to see instead of what was actually happening?
- Did you trade with a trading plan?
- Was your position size too big?
- Did you allow fear, greed, or ego to override your trading plan?
- Did you trade in a market you did not fully understand?
- How much did your stubbornness cost you?
Your best trade:
- Did you trade on a high probability setup based on a chart pattern or backtested entry signal?
- Did you enter with a great risk/reward ratio?
- Were you able to let a winning trade run as far as it would go?
- Did you trade on the right side of the trend for your time frame?
- Were you able to trail your stop to let your winner run?
- Did you trade in a market after doing your homework?
- Did you keep your opinions flexible but your trading plan firm?
- Did you react and trade the actual price action in your time frame?
- Did your discipline pay you a nice dividend?
- Did your small position size allow you to trade in a clear and logical manner?
A trading journal teaches us about ourselves. If you are not keeping a trading journal, I strongly suggest that you make it one of your New Year’s resolutions. Analyzing your biggest losing and winning trades each year is a window into your trading psyche. This kind of self analysis will show you what you should do more of, and what you should avoid in 2015. Remember, a significant key to trading success is to do more of what works and less of what doesn’t work.
