Monday, October 15, 2012

Know Yourself to Trade Better



For trading we analyse various types of data including chart patterns. Most of this data is about the economy, markets, the security etc. These data points are related to external factors of trading. One of the biggest factors in trading is, the trader himself but how much data we collect and analyse about ourselves as traders? How much we know ourselves?

To trade better the trader has to know himself better and to know himself better he should keep record of data points related to him/her also. Following are some of the examples of things we should keep record of. 

1.       The time of the day when I enter, exit a trade, what percentage of my winning trades were taken at markets open, afternoon and near closing time?

2.       For how long I keep a position open and what is the percentage of winning trades that were open for a few minutes, few hours, and few days?

3.       On what signal (for example support/resistance, breakout/breakdown, and divergence, classic chart patterns) I enter and exit? What is the percentage of winning trades for each set-up/signal?

4.       What is the position sizing of my trades? How much I risked in most of winning trades and how much I risked in most of the losing trades?

The above points are just a few examples and there is much more to know about ourselves. After we start keeping records of the above data points, we can analyse and know things like- 

(1)    Which is the best time for me to trade, Morning, noon or evening?
(2)    In which type of trades do I fare better, trades held for a few hours or few days?
(3)    What set-ups are most profitable for me?
(4)    How much risk can I handle comfortably?                                                                                                                     

Patterns about ourselves will emerge when we analyse a large sample of data. Our strength and weakness will be revealed to us and when we trade keeping in mind our strengths and weaknesses we have a better chance to succeed.

[Contributed by Jitender Yadav. My thanks to Jitender for providing these posts]

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