Trading is not just about entering and exiting a trade and making or losing money in between. There is so much more to it that I found most traders are not considering especially since preparation and record keeping are not being taken seriously by most traders. I found that often traders contacted me believing that they had some sort of psychological problem but often after a few questions it already became apparent that their focus was purely on the trade itself, rarely any time is spend on thorough pre- and post trade analysis and evaluation. This lack of professional approach often results in emotional issues such as lack of confidence, fear of failure, anxiety and even as far as depression.
Here are some key points that every serious trader must consider:
1. Do you have a pre-trading session routine?
- Physical preparation: are you well rested, well fed, had enough water
- Mental preparation: 'Getting Into The Zone': calming the mind, focus exercise, mental rehearsal
- Market preparation: fundamental research and analysis, technical / chart analysis, announcements, political events
2. How well do you know yourself? Do you know what your Ideal Trading State (ITS) is?
- Ask yourself: What is the difference between the times when you make excellent trading decisions compared to when you made poor trading decisions?
- How do you react emotionally and intellectually to making money? How do you react to losing money? Why?
3. How are you organizing your trading session?
- Do you have a step by step in logical order written down trading plan (checklist style) on your trading desk?
- Do you have strategies to sustain your ITS during the trading session?
- How well did you time your entry?
- How well did you time your exit?
- How was your mental state during the trade, where you anxious or composed?
4. What is your after trading routine to complete the trading session?
- How do you ascertain how well you have done in your trading?
- Do you measure the quality of your trading results such as the relationship between profitable, unprofitable and trades let passed?
- Do you measure the level of your focus, confidence, patience and discipline during the trade?
- In a nutshell, do you perform an emotional and performance analysis (metrics) on a daily basis to ascertain what you have done well and what you can improve on?