Whenever you put on a trade, you must have two goals. The first, of course, is to make money. The second is to become a better trader. You can reach the first goal in some trades but not in every trade. There is a fair bit of randomness in the markets, and even the best planned trades can go awry. Even a top trader cannot win in every trade—this is a fact of life. On the other hand, becoming a better trader is an essential and very reachable goal for every trade. Whether you win or lose, you must become a better trader at the conclusion of each trade. If you haven’t, the trade has been wasted. All the energy and time you put into analysis, all the risks you took with your money—wasted. You must keep learning from your experience, otherwise you are just playing at being a trader and not being serious. The absence of records exposes a wannabe trader as a dreamer and an impostor.
The best way to learn from your experience is to keep good records.
Keeping good records allows you to transform fleeting experiences into solid memories. Your market analysis and your decisions to buy or sell become deposits in your data bank. You can draw on those memories, re-examine them, and use them to grow into a better trader. Writing your notes makes you focus and use your “extracranial memory.” A human mind has a limited amount of memory that is instantly available (what the computer people call RAM).
The rules of money management we have just discussed will help you survive the inevitable rocky times. The record-keeping methods I am about to share with you will put your learning into a solid uptrend, and your performance will follow. Money management and record-keeping, taken together, create a rock-solid foundation for your survival and success. The rest—the analysis and the techniques—you can pick from this book, my other books, or those written by other serious authors.
Almost anyone can make an inspired trade, hit the market right, and watch profits roll in. No matter how inspired, a single trade or even a handful of trades will not make you a winner. You need to build a pattern of trades that on balance are successful over a long period of time.
The proof of a successful strategy is growing equity. Seeing your equity grow quarter after quarter and year after year is the true proof of trading prowess. Trading is a hard job. We tend to become a little arrogant and careless after a big win or a string of wins. That’s when, feeling invincible, we start feeding our equity back into the markets.
Any trader, even the worst gambler and loser, will occasionally hit it right and score a profit. A single profit or even a handful of profits does not prove anything or matter in the long run. Even a monkey throwing darts at a stock page can occasionally pick a winner. Our most important challenge is to maintain a positive slope of our equity curve.
For that you need to keep good records.
You need two sets of records. All the numbers relating to your trades must go into a spreadsheet and the visual record of your trades must go into your diary.
The best way to learn from your experience is to keep good records.
Keeping good records allows you to transform fleeting experiences into solid memories. Your market analysis and your decisions to buy or sell become deposits in your data bank. You can draw on those memories, re-examine them, and use them to grow into a better trader. Writing your notes makes you focus and use your “extracranial memory.” A human mind has a limited amount of memory that is instantly available (what the computer people call RAM).
The rules of money management we have just discussed will help you survive the inevitable rocky times. The record-keeping methods I am about to share with you will put your learning into a solid uptrend, and your performance will follow. Money management and record-keeping, taken together, create a rock-solid foundation for your survival and success. The rest—the analysis and the techniques—you can pick from this book, my other books, or those written by other serious authors.
Almost anyone can make an inspired trade, hit the market right, and watch profits roll in. No matter how inspired, a single trade or even a handful of trades will not make you a winner. You need to build a pattern of trades that on balance are successful over a long period of time.
The proof of a successful strategy is growing equity. Seeing your equity grow quarter after quarter and year after year is the true proof of trading prowess. Trading is a hard job. We tend to become a little arrogant and careless after a big win or a string of wins. That’s when, feeling invincible, we start feeding our equity back into the markets.
Any trader, even the worst gambler and loser, will occasionally hit it right and score a profit. A single profit or even a handful of profits does not prove anything or matter in the long run. Even a monkey throwing darts at a stock page can occasionally pick a winner. Our most important challenge is to maintain a positive slope of our equity curve.
For that you need to keep good records.
You need two sets of records. All the numbers relating to your trades must go into a spreadsheet and the visual record of your trades must go into your diary.
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