subject: Improving Profitability Using a Trade Log to Identify Repeated Trading Mistakes [print this page] Improving Profitability Using a Trade Log to Identify Repeated Trading Mistakes
What are the trading mistakes that, when made repeatedly, affect profitability from futures trading? According to one Emini futures trading guru there are seven which are repeated below.
1.Trying to pick tops or bottoms,
2.My gut says we're going to break out ,
3.No confirmation from my Volume indicators ,
4.Hesitating on entry,
5.Canceling my stop (the worst one of them all),
6.Moving my profit target (got to let the winners run), and
7.Letting a profitable trade turn into a loser (a rarity).
By using a trade log of your trades, the trading mistakes will begin to show up allowing for corrections. The more detailed your trade log, the more information is gained from each trade. While for some it is helpful to include more than raw data, like things to remember, how you felt about the trade, and any information which will aid your future investing, for others it is too much information and becomes counterintuitive.
It's best to keep it simple, record only the data necessary to evaluate the information against the above seven mistakes not to make. The result should be fewer and fewer mistakes as your trading goes on. It's easiest to keep a trade log in a spreadsheet, with one line per day. By including formulas in your spreadsheet it will automatically calculate the running total of trading profit and performance.
Trade log instructions:
1. Starting Assumptions: Include starting date, Emini point value and actual brokerage costs in the first section. Choose your trading goal for the year and fill in your starting account balance and level at which you'll add contracts. Finally decide daily targets for points made and number of trades needed to achieve it.
2. Inputs of Daily Performance: Every day go to the Trade Log tab and input your daily performance including points made, number of trades and number of contracts. The formula in the spreadsheet automatically calculates your daily profit.
3. Inputs of Mistakes: After trade performance statistics are in, assess every trade against the mistakes listed above, or any of your own mistakes. The spreadsheet automatically calculates your running split.
4. Performance against Target Chart: The trade log spreadsheet includes a simple chart of running performance against annual budget.
It's generally better to have a modest target and reach it each day than to have high aspirations that are never met. The trade log helps to keep you focused.
