Know Your Numbers
Know Your Numbers
Know Your Numbers
Every business has its numbers, every business has its Income Statement.
Remember the old formula Assets - Liabilities=Working Capital from accounting 101?
Well trading is a business your assets are your trading Capital, and your liabilities are your off trades (losses). Your liabilities are also every
thing you do to produce those losses. Yes you do produce those losses, so take responsibility for them, so you can choose to do
better.
In trading like any other business you need to know all the details of your business. You need to know what your expenses are vs. your
income, you need to know your profit vs. loss relationships. So in order
for you to be in this business for the long haul, you need to know your
numbers.
When I teach personal students my insights on Trading Psychology, I go over methods on how to control losing attitudes and behavior, The tasks of good trading, and several other key factors.The one I
express in the beginning for an instant improvement is keeping a trading log or diary. It amazes me that even though I stress it, few
people do it. When I attempt to do a review of their performance they
have no details of how they achieved their trading results(Good or Poor). We
cannot go over what caused their performance.
They only have their account statement with a net number in it. Are they afraid of what they may find out about themselves?
How can you move forward if you don t know your own thinking process in the
trading arena? As good old Albert Einstein said "We can't solve problems
by using the same kind of thinking we used when we created them."
Only knowing your account balance is NOT the way to improve your trading. You need to have a full picture of how well you are performing at all times.
Accurate Diary keeping and knowing your risk to reward ratios provide you
with important information you need, seeing clearly
how the rules you set up are working out for yourself.
You will be intimately Self Aware and this will prevent you from making a serious mistake ( Moving A stop Loss, Adding to a loser that was not preplaned, cutting a winner to quickly).
"No Trader Gets To Be A Market Wizard Without A Review Of His Moment To
Moment Thought Process" thats what I say.
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