One of the greatest struggles novice traders face is monitoring their progress carefully. Beginning traders have not yet developed the skills to trade profitably in a variety of market conditions. Understandably, it is hard to develop a genuine sense of self-confidence when you aren’t sure just how well you can actually trade. It’s natural to wonder if you are doing well merely because of a chance set of market conditions, or whether you are truly building up some legitimate trading skills.
The bottom line, however, is that you must hone your trading skills to the point that you have rock-solid confidence and truly know that you can trade in a variety of market conditions. And the key to building up the requisite skills is to monitor your performance. In the end, you must face the cold, hard facts regarding your ability to trade. You must objectively evaluate how well you are trading and make midcourse corrections to trade profitably.
It can be emotionally difficult to see how well we are doing. We are usually afraid that if we look at our performance too closely, we’ll discover that we are inadequate. But usually, we tend to think that matters are worse than they actually are. Ironically, we may spend more time and energy trying to ignore how poorly we are doing than actually looking at our performance and taking active, decisive steps to change matters.
Self-monitoring is the key to success. It is useful to keep a trade dairy. If you are afraid to look at your performance, you might want to file away trade information and decide to look at all the information at a later date. For example, on separate sheets of paper, you might record the market conditions for the trade, the trading strategy, your mood, the rationale for the trade, and its outcome. Record information before and after the trade and immediately file it away. If you know that you don’t plan on looking at the information immediately, you’ll feel less pressure and dread. And if it is just too emotionally hard to look at your performance, you can decide to put it off until you can muster enough confidence to look at it.
Looking at your performance can be difficult. It is useful to set up a time and place to study your performance objectively. Make sure you are rested and relaxed and free of stress. If you look at your performance when you are emotionally volatile or tired, you’ll tend to get easily upset and have difficulty studying your performance records objectively. Pick a quiet place to review your records, a place where you feel safe and secure. Also, set up sometime after you study your performance to recover emotionally. You may need some time to regain your emotional composure should your performance record upset you.
Make sure that you have some time to digest the feedback and accept it. For example, you don’t want to trade if you are emotionally upset about your performance. If you try to trade while you are still a little upset, you may take low probability setups or make trading errors. There may be an unconscious need to recoup losses even though you don’t have a plan for doing so. It’s better to regain a sense of confidence and develop a well-devised long-term plan for improving your performance.
There’s no need to avoid facing the cold, hard facts regarding your trading performance. As with any challenging skill, trading requires that you objectively look at your performance and make necessary adjustments. It can be difficult at times, but the more you can analyze your trading performance objectively, the more profitably you will trade.