How to Change Your Trading Career
11/25/2014 8:00 am EST
If you have the technical knowledge, but cannot seem to turn the corner on making good profits, Paul Lange of Pristine Capital Holdings, Inc. has exercises that can help you improve your results.
It should be stated that if you do not have the technical expertise, you are not at the level that these comments will help. If you do not know how to look at a chart, no amount of refining will help you.
After a long time of working with many traders, one discovers that there are certain truths that cannot be denied. There are four things that are done so consistently wrong by new, and even fairly experienced traders, that each of these mistakes results in bad trades 90% of the time for most traders. If traders would simply follow these four rules, they would eliminate most of their losing trades. The fourth rule does not really fall into this "90%" category, but is perhaps the most important, and is the subject of today's discussion.
This is not really a 'new' rule. However, the first three rules are ineffective and worthless if you do not know the fourth rule. The fourth rule is to simply follow up to make sure that you are doing each of the first three rules properly.
Now, DO NOT stop reading this and say, 'yea, yea, follow up, I know'. There is an exact procedure that must be followed. When this is followed, traders are always shocked and amazed at the results.
1. Print out the chart for the relevant time frame(s) for the trade you took. If it was a five-minute Pristine buy setup, print the five-minute chart.
2. Write the name of the strategy you played on the top of the chart.
3. Take a 'green' marker, and mark in the correct entry, stop, targets, and management, based on your trading plan.
4. Now take a 'red' marker, and mark in the actual entry and exits you had based on your trading records.
5. Now decide if the play you did was substantially correct according to your trading plan. If it was, write a 'good' on the top of the page.
6. If the play was not correct according to your plan, write a 'bad' on the top.
7. If the play was bad, put the reason why on top.
Save these until the end of the week. Over the weekend, take all the 'good trades' and start a binder of good trades, saving the best examples of each of your strategies. We are very visual people, and learn best by pictures. Take all the 'bad' trades and categorize them by the reason they were bad. Take the number one mistake you committed that week, and do whatever necessary to resolve that problem the next week. Eliminate ONE mistake every week.
Please keep a couple of important rules in mind.
First of all, this process MUST be done at least 30 minutes AFTER the market closes. Traders often do not think properly when the market is open, and you will 'rubber stamp' any trade you do if you look at it soon after you close out the trade. The best case is to wait until that evening.
Second, it is BEST to hand write on the chart. Print the chart, then use your own hand to write on the chart. Many like to use PowerPoint or other software, but the best learning will come from having all of your senses involved. If you must, it is better to do this on the computer than not at all, but try doing these by hand, as shown in the example above.
If you are serious about your trading, see how well you currently do at these, and vow to follow them religiously for a week. You may be surprised.
By Paul Lange, Vice President of Services, Pristine Capital Holdings, Inc.