In Continuation with Previous article What to Include in Successful Trading Plan
Keep good records
Good traders always want to know why and how they win or lose a trade. Keeping good records helps you recognize what goes into a successful trade. They also prevent you from repeating mistakes. Your trading records should contain the following information:
- Entry of each trade
- Exit of each trade
- Resistance levels
- Notes about the trade and what you learned
Your trading records need to include as much detail as possible so you can analyze the information you recorded about the trade. This report lets you evaluate the profit and loss for a particular system, average time per trade (important for calculating trade efficiency), draw-downs (amounts lost per trade based on a trading system), and other factors that help you see the overall picture of your trade so you can compare your information to a buy-and-hold strategy. Think of this report as you doing accounting for your business.
The post mortem
It’s important for you to keep a trading journal to write down your assessment and conclusions of a trade. At the end of the day, knowing why and how the trade went the way it did is more important than calculating the profit and loss which is nothing but a by-product of your processes.
The bottom line
Before you begin trading a new system, be sure to test your preparation by doing paper trades for at least the first month or two but not too long as nothing beats real market trading experience and having real risk capital on the line. This process doesn’t guarantee that you will have immediate success when you start trading real money, but it will help boost your confidence that the system you use will actually work. It is more important to gain skill in making trades without hesitation than it is to decide on a trading system.
Your chances of winning in the market are based on your level of skill and your trading system. Nevertheless, you cannot expect to win without losing. Skilled traders will not enter a trade unless they know that the odds of winning are in their favor. Skilled traders will always lose some battles, but if they cut their losses short and let their profits ride, they will win bigger than they lose.
Treat your trading efforts as a business and you will survive in the trading game. Successful traders who win consistently do this. Your next step is to create a concrete trading plan using what we have discussed in this tutorial.