How to Get Better Every Month
01/06/2012 3:00 pm EST
Instead of living and dying by each day’s results, evaluate your trading on a month-to-month basis, says trader and author Raghee Horner, and continually learn and improve.
What should a typical month of trading look like? Today we’re with Raghee Horner, and Raghee, you’ve written about that very topic. Why don’t you walk us through some of the high-level steps to trading in a month and what that would look like.
I wrote a book called 30 Days of Trading, originally enough, and I was actually inspired by a gentleman by the name of Tony Oz, who had originally done this back in April 2001. He made a bet with somebody saying that he’ll trade for a month and show everything: scars, everything….
I thought, “I want to do this one day,” so my second book was more of a journal style. One lesson that I took away from it—and I hope readers also take away from it—was look at the month as a whole. Don’t beat yourself up day to day.
A lot of people have a loss one day and they really let that psychologically bury them.
See related: How to Bounce Back from a Losing Day
Step back, look at the week; step back, look at the month, because now you’ve got all the different economic results in terms of the data, the psychology of the beginning of a month, month-end repositioning, all those things, and you can step back and ask yourself, “How did I tackle that,” and then apply it to the next month.
Another thing that was really interesting by stepping back for that entire month is looking at the culmination of the trends that I dealt with, because there’s no way we could know whether the market is going to be scatter bound and really in a volatile, sideways market, or whether it’s going to be trending.
That particular month, I had a great trending month, and I had a lot of what I call “swing trades” and “trend follows.” So when we step back someone might say, “Well, she’s just a trend-following trader.” That’s what the month yielded.
I think a lot of traders could step back and say, “What was the psychology that dominated that month?” and say, “Well, that may not necessarily define who I am as a trader, but it defined what kind of strategies I used to tackle that psychology.”
How would you advise that traders bounce back after making a mistake?
Psychologically, I have the three Cs. This is what I’ve always guided myself by. Basically, it’s comprehension plus confirmation equals confidence.
Our capital is great. Our physical, monetary capital looks great, but the thing that I try to protect day in and day out is my confidence, because once that’s gone, I’ve lost my mojo as a trader.
So, confirmation comes from finding some type of strategy. Maybe you went to a seminar, a Webinar, a Traders Expo, and learned a strategy. You’ve comprehended it and learned it thoroughly. These are to apply to the market.
When you find yourself getting results, it’s almost like going on a diet. Why do we go on a diet? Because we saw a friend who lost weight, or if they’re putting muscle on, we’ve got a friend who put some muscle on. You think “Wow, it worked. I’ve got some confirmation.” You feel confident that I can move on and apply it to the market, so I use that diet analogy.
Take the time to learn the steps, then go into the market and practice them. The more you practice them, you develop this thing, this thing called confidence, and that’s what you have to protect, in my opinion.
So, what I really feel psychologically people should do is take the time to test out what they know until they naturally come into a confident state with their trading, and don’t apply these ideas of position sizing by calculator and things like that. Use micro accounts, use mini accounts; that’s the luxury forex traders have.