Trading Lessons I Learned the Hard Way, Part 2

08/02/2012 9:00 am EST

Focus: STRATEGIES

Ron Wagner

Principal Partner, RevolutionaryTrading.com

Ron Wagner of Revolutionary Trading discusses the lessons he learned from his early days of trading and how his trading has evolved to become profitable.

Find the previous article here. Start at the beginning here.

We are now net profitable each month and still “swinging” (swing trading). We have a routine and a trading plan.

Our trading plan, at first, was much more about the criteria of trades we would take. Entry criteria, where to place stops, where to take profits, how many shares to buy, maximum investment for each trade, and maximum loss we would allow. We didn’t know enough yet to apply other elements to our trading plan, so we kept it very simple.

I remember today as if it were yesterday: when we learned what a stop-loss was, I went back and checked all our losing trades from before we started using technical analysis. Back when we didn’t know anything, if we had simply put an arbitrary stop loss of $1 per share on all of our trades, we would not have lost about $35,000.

What an amazing discovery for us. If only we could redo those trades.

From this discovery, and from establishing my own way to track our trades, I started to adjust our trading plan just a little bit, month by month. I will never forget chasing Angel around the house with my binders of information, suggesting that if we just adjusted our stops in one fashion we could maximize our ability to take more shares while reducing risk. She said, “Stop chasing me around and try it for 30 days, and see how it works.”

It was from those days that I really focused into my own personal statistics analysis. I really enjoyed this part, because each Friday or Saturday, I would review all our trades and come up with a small refinement that I could work on the following week.

It was like a weekly debriefing but with a next mission in mind. At this time, and at no time in my trading career, did I have anyone to look over my statistics. I wish I had, because it would have accelerated my results that much more.

I continued to do this each week, and it turned out to be one of the many elements that helped us increase our profitability. I had to be honest with myself, as the statistics didn’t lie. I had to take action each step of the way.

As I created our journals and tracking system, I could really begin to see what we did well and what we didn’t do so well. Making small adjustments along the way was an incredible benefit to us.

At first we just tracked our wins and losses and the average win and loss. I printed out charts of each trade and put notes on each one along with marking our entry, stop, and targets and actual results. Nothing too fancy, but enough that I could see our progress and or what adjustments we needed to make.

Remember, this is our swing trading plan. You will hear more about how I chose to try daytrading and that more elements were needed for that plan. That’s for later.

Lessons learned:

  1. Any plan, even if a simple one, is better than no plan at all.

  2. The more simple you make your first plan, the more likely you will follow it.

  3. Set up a journaling system to track your trades. Use excel and don’t over complicate it at first or you won’t use it.

  4. Review your trades each week or better yet, see if you can find someone to review them with you for an objective opinion on steps to take to improve.

Next, you will read how I got involved in daytrading and what I did step by step to this type of trading.

Ron Wagner can be found at Revolutionary Trading.

Part 3

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