Written by admin on December 28th, 2007
Do you review?
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The legendary Jesse Livermore, widely considered one of the best traders of all time, used to lock himself in a bank vault over New Year’s and review all the trades he did for the previous year while surrounded by the stacks of cash he earned during that year. Now we aren’t suggesting you do quite that, but if you made enough cash in 2007 to convince a bank manager to let you do that, let us know!
For the rest of us, the close of the year is the perfect time to evaluate and review our strategies, money management, discipline, psychology, trading plan, and all the other skills that may spring us from a good trader to a legendary trader. So to help you out, we have comprised a list of some of the things we examine come year end.
1. What were my biggest mistakes?
Although it’s nice to reminisce about all those huge wins, what’s going to take you to the next level is to eliminate all those nasty lapses in judgment that cost you money. By examining those mistakes, analyzing what went wrong, and learning from them, you can avoid those pitfalls in the future.
2. Are my expenses as low as they can be?
You have to look at trading like a business. As a result, to maximize your profit, you have to keep your expenses low. Commissions can eat you alive, especially while day trading. So always try and lower your round trip costs, to increase your bottom line profits. Don’t forget to also examine, your data feeds, charting apps., trading rooms, and anything else your business spends money on.
3. Has the expectancy or confidence of my strategies dropped?
The year’s end is a great time to reevaluate your strategy’s expectancy. Most day traders examine their results over a too small time period. So they end up examining their trading over a couple of weeks or months. Now, you hopefully have results for most or all of the year. This will help you determine whether a certain strategy may have worked well during certain market conditions and not others. By looking at the whole year you are trying to not miss the forest for the trees.
4. What is my disaster plan?
It’s always good to review your day trading plan and what you are going to do incase of an emergency. Do you know your backup brokers telephone number? How many contracts will it take to offset my standard position? What are the usernames and passwords to access my other trading platforms? Is my broker’s number in my cell phone? What if my cell phone batteries are dead? You get the idea.
5. Am I using the best money management formula?
Some call money management the holy-grail of trading. Money management can take your everyday results and sky rocket them. If you haven’t taken your results and evaluated them with different money management strategies, you have no idea what you are missing. Just by applying a fixed fractional money management formula over the same dollar amount every trade you can cause your equity curve to explode.
6. Keep you losses small!
Although technically not something you have to review, it is a mantra you have to constantly remember when daytrading. In order to keep trading into 2008 and beyond, remember, remember, remember, if there is only one thing you learn about day trading, it’s keep you losses small!
We all know that past performance doesn’t always predict future performance. But, with a little preparation and fine tuning, you too will be heading happily down to the vault.
We wish you good luck in 2008!
Tags: Review, Tips
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