Screencast Video and downloadable, customizable Objective Trade and Day Grading Tool can be found below.
This screencast is a follow-up to a previous post that I wrote titled Boost Your Trading Performance by Objectively Grading Trades and Days. In that post, I discuss the importance of judging (and grading) each trade that you take and each day that you’re active in the market based not on the P&L outcome, but instead, on your execution of process. As communicated in the post, we can’t control when we get paid, but we can control how well we execute our process. Most of what’s contained in that post lines up with the content in the following screencast and tool, but there are a few differences. These differences include:
- The fact that there’s an actual tool to download and use (below) for personal use (this previously wasn’t available).
- The styling of the tool has been improved upon in the tool available to download as well as in the screencast, compared to the style of the tool in the previous post’s screenshots.
- The total number of potential points for the trade grading scale has increased in the tool available for download as well as in the screencast from 45 points (as seen in the previous post) to 50 points.
- Other minor differences.
Protect Your Mindset at All Costs
The most important (and often overlooked) concept in trading is the following: Your mindset will ultimately be the deciding factor in whether you succeed or fail as a trader.
Think of it this way: Traders do not ultimately fail due to blown up accounts – they can save their money and start a new account (as most successful professional traders have done, sometimes multiple times). Traders ultimately fail due to experiencing a fatal blow to their mindset. Once your mindset is severely damaged, it can be next to impossible to find the strength and courage to continue persevering towards your original goal of being a successful trader. It is for this reason that you must do all that you can do to minimize the possibility of experiencing a fatal blow to your mindset if you want to be a part of the minority of successful traders by proactively developing a strategy to strengthen and protect your mindset. Continue reading
This article, which examined 70M+ trades, emphasizes the importance of keeping your losers small and your winners big. The concept is simple enough, yet the vast majority of traders fail at trading because they struggle to do this effectively over time. As the article explains, most traders do the opposite: They cut their winners quickly and let their losers run, which results in a positive win rate but a negative expectancy (the negative expectancy matters a lot more – unless you like losing money with a high win rate). Note: I refer to R-Multiples a number of times in this post – if you’re not familiar with them, then read Van Tharp’s informative explanation of R-Multiples.
Possessing the ability to both 1) respect (and accept) your initial stop loss (risk) and 2) let your trades run to their targets, amidst a sea of volatility, rotations against your position, and uncertainty, requires four skills (trading virtues, really) which many traders never develop: Patience, Discipline, Confidence, and the ability to read a market Contextually. Continue reading
03/05/2016: Thank you to all of those who participated in this contest. There were some great stories and responses (still available to view in the Comments section below), some of which didn’t directly answer the original question, but were appreciated nonetheless. Here are the responses that I felt provided the most unique answers to the following question (I’ve also included my own insight and commentary related to each response): Continue reading
A link to view and download my Position Sizing Tool Google Sheet can be found at the end of section #1: Measure Risk in R-Multiples.
One common trading hurdle that I see with several traders (even some who are highly followed on Twitter with booming subscription services and chat rooms) is their difficulty in scaling up trade size once they feel that they are in a position to do so. This is something that can be overcome fairly easily by making just three changes to your methodology: Continue reading
One routine that has helped me in my trading career is to keep a record of all of my trades. I use a number of tools to accomplish this, but two that I use most often are Tradervue and Google Sheets. In this post, I’m going to focus on how I use Google Sheets to:
- Grade each trade that I take.
- Grade my overall performance for each day that I actively trade.
Two roads diverged in a wood, and I —
I took the one less traveled by, And that has made all the difference.
– Robert Frost
I have a tremendous amount of respect for anyone going down the entrepreneurial road in life – the road less traveled. We as traders are perhaps the purest form of the entrepreneur.
Many of us left behind secure jobs in corporate America (though as many of us know, that security is merely an illusion). Many of us left behind thriving small businesses (myself included). Many of us were engineers, doctors, teachers, computer programmers, initially taking the more comfortable and paved road in life. But then something happened along the way – there was a divergence in the road, and you decided to take the one less traveled, the one that would lead you to an industry where 90% fail. The fact that you followed your passion to become a trader (no matter where you’re at in your trading career), you have my respect. Continue reading
A link to view and download my Return on Risk Projection Tool Google Sheet can be found at the end of this post.
I talk on Twitter about the importance of defining 1R (your static risk on every trade) as part of your trading methodology. When you keep your risk static on every trade, you significantly decrease the chances of destroying your account via a drawdown or even a few disastrous trades.
All too often, traders are focused on their win rate. However, as the following table illustrates, win rate should always come second to Return on Risk. Continue reading