Many traders are simply putting in the hours, thinking that if they spend enough time around the markets, analyzing charts, reading books, and studying courses, their skill level will improve. "Putting in hours" is necessary when you are starting out, as there is a lot to learn. But putting in hours won't necessarily increase your profit potential. If you always do the same thing and make the same mistakes, putting in the hours will just ingrain those habits even more.
To improve, make repeated and deliberate choices. Here are five things to start doing today to improve your performance.
- Trading can be challenging, especially for those just beginning in the markets, but many early missteps can be corrected with education and experience.
- If you can't figure something out, ask for help! Even if it seems like a small issue, there are several resources both online and offline that you can seek out.
- That said, stick to your guns! Others can lead you astray and lead you to act emotionally instead of logically.
- Practice, discipline, and focus are key to keep you trading smart and strategically day in and day out.
Have someone in your life that makes you accountable for your trading. Call them your trading referee. Lapses in discipline can happen to anyone, so having someone in your life that keeps you accountable will keep those lapses to a minimum and the mistakes less costly.
This person could be a mentor, coach, or just a friend or family member (not necessarily a trader, but it could be) who you've told your plan to and who you keep updated on your performance. Often just knowing that you need to show your trades to someone—and those trades have to align with the strategy you told them you were following—is enough for most traders to avoid some mistakes.
A chat room, forum, or regular meeting with people you respect is another option. Share what you are doing, what you are struggling with, and what you are having success with. Ask for feedback. Anyone can get sidetracked, so be open to being told when you've gone astray. When your own discipline and self-awareness fail, you'll have someone to help you get on track. Choose your trading referee carefully. Choosing the wrong person can do as much harm as good.
In addition to help from people, there are several online resources for trader education and training, and of course, there are also reams of books on the subject that can and should be consulted when in need.
Avoid Other's Opinions on Trades
Talking about strategies with other traders, or discussing your performance with your trading referee is fine, but avoid the opinions of others when it comes to specific trades. Trade your trading plan, your way. It doesn't matter if a trader you respect says they are going to buy when your plan says to sell. You must follow your own plan. That is the only way you can see what works for you—and keep your stress levels to a minimum.
Constantly changing your mind based on what other people, the news, TV, or websites say will cause stress and lead to poor performance. Even great traders make losing trades, so trust your own plan. Avoid discussions while you are trading that could cause you to second-guess your positions, or abandon your methods altogether. You put time into researching and creating your strategy. Don't let someone's else words ruin all that work.
A strategy may seem simple on the surface, but even a simple strategy is hard to implement in live market conditions. Every day, every trend, every pullback is slightly different; nothing looks exactly the same as it did in the textbook examples. To get proficient at implementing a method, practice it, a lot. Trade it in a demo account until you consistently see profit from it.
In sports, you do drills to create muscle memory, so you can instinctively act when the time is right. In fast-moving market conditions, if you have practiced a strategy, you'll be able to implement your skill at the right time. If you haven't practiced, you'll likely miss the opportunity, enter too early, or make mistakes with your position sizing. Build your skill base in practice sessions, so you're not learning the hard lessons when real money is on the line.
Mental Clarity, Everyday
Each day take one minute before you trade to make sure you are feeling clearheaded, focused, and present. Also take a couple of seconds to reiterate that you're here to trade, not check your social media accounts, email, or watch online videos. When you trade, focus on trading. Close your eyes, center your attention on your trading plan and visualize following it. Check the economic calendar to be aware of events that may move the market so you aren't taken by surprise during the day.
These small steps can save you thousands of dollars over the course of a year. If you're angry, upset, or unfocused, avoid trading. It only takes one day, or just one trade, to lose an entire account when not in the right frame of mind.
Take a few minutes and prepare for each day. Foster a state of mental clarity before you begin trading, and if you can't establish that mental clarity, don't trade that day.
Record Every Trade You Make
Monitor and review every trade you make. Take screenshots of your trades with entries, stop loss levels, targets, and your technical and fundamental notes so you can easily review your trades at a later time. A screenshot is worth 1,000 words in a trading journal because it shows exactly what you did in those exact market conditions.
If you're a day trader, review your trades weekly and monthly. If a longer-term trader, establish a time where you'll review your trades, such as quarterly or semi-annually. If your trades last a long time, take a screenshot at the time of the trade, and a screenshot when you get out (showing everything that happened between entry and exit).
A careful review of your trades will show what your common mistakes are—which you can deliberately work to improve (practice)—and what you're very good at, which you could potentially capitalize on more.
The Bottom Line
Being a profitable trader takes constant work. Profitable trading is not a destination; it's only a state made possible by deliberate and practiced actions and choices. As soon as a trader stops following those deliberate and practiced actions, they will fall out of the profitable state. Having someone to keep you on track will help keep these lapses to a minimum. So will avoiding the opinion of others on particular trades. Be focused every day you trade, and if you are not, don't trade that day.
Finally, record everything you do, taking screenshots and keeping notes. This will give you definitive feedback you can use to continually and deliberately improve your trading methods.