5 Tips To Analyse Your Trades Like a Pro
Short-term Results Don't Serve The Trader As Reliable Feedback
When I started my trading journey I had no idea how to measure my performance. All I had was an equity curve and I thought it was all I needed to gather feedback on my trading.
As a consequence, it drained me to have a losing day. It meant my strategy didn’t work and I had to find something better.
Fast forward I got more experience, connected with more traders, and learned one precious thing that changed my attitude towards trading:
Results don’t serve the trader as straight feedback for the quality of execution, at least not in the short term.
This was a mindset shift for me at the time.
To potentially offer you the same mindset shift, today, I bring you 5 practices that helped me get the right feedback from my trading without the noise of short-term results.
Let’s get into them:
#1 Create Space Between Trades and Analysis
Avoid analyzing your trades immediately after closing them. Instead, create a gap to refresh your mind and change the emotional context.
Only come back to your trading journal to analyze trades at the end of the day or week, not right after each trade or right at the end of your trading session. This way, you can make a fair and objective judgment of your performance.
Eventually, it’s the process of analysis of trades that helps you recuperate from the pain of your losses and the overconfidence from your wins. On top of that, it’s the insights you take from the analysis of your trades and performance that make for your improvements moving forward, so don’t underestimate it.
#2 Eliminate Hindsight Bias: Objectively Analyze Your Trades
Hindsight bias is the common tendency for people to perceive past events as having been more predictable than they were.
This can affect the way you analyze your trades tremendously. After seeing what happened after the trade is closed it’s easier to criticize your decisions.
“I should’ve closed the position earlier”
“I should’ve held trade a bit longer”
“I could’ve entered earlier”
A well-systematized strategy helps you remove this hindsight. However, not all traders use a full rule-based approach, sometimes it’s more discretionary. A great way to remove the hindsight from any trading approach is by studying your trades in two steps:
➊ At the moment of the entry (remove price after entry point).
➋ After the trade is closed (take a screenshot 1-2h after you closed the trade).
This way, you can open the first screenshot and by focusing solely on the information available at the time of entry, you can better judge your decision-making process. When judging your exit, it's crucial to let go of the need for perfectionism in execution. Adopt an exit style that allows for flexibility like partial profits.
Remember, if you can’t formulate a rule you can use on further trades then you’re analyzing on hindsight!
#3 Replace $ with % or points/pips
Track your progress using percentages or points/pips instead of dollars.
Removing money-related data points from your journal helps maintain a neutral mind. By shifting your focus to percentages or points/pips, you can detach yourself from the immediate financial outcome and concentrate on refining your trading process.
#4 Ask yourself: Am I satisfied with my execution?
There's a lag between your performance and results. But if you keep improving a little bit every day, your results will catch up fast.
At the end of each trade, ask yourself: “Am I satisfied with my execution?”
You’re not asking if you’re happy with the results, you’re asking if you’re happy with the execution of your strategy.
This is a perspective shift. It’s not only the winners that deserve our attention. There are awesome losers too, the ones where we were able to cut them short. Don’t let those escape from your analysis!
#5 Predict Worst-Case Scenario
A simple but effective question that helps me to be at peace with all my trading decisions is:
“If I do [this] and the trade turns into a loss, will I regret my decision?"
For example: If I take this entry and the trade turns out to be a loss, will I regret having entered it?
Another example: If I move my stop-loss to breakeven here and price sops me out, will I regret it?
This helps you recall your system’s rules and, if you trust their efficiency for a series of trades, you’ll not regret your decision even if it gives you one loss.
Try it for yourself, try to predict how you gonna feel based on your execution, not results.
Final Words
Although the equity curve and account balance measure your long-term trading results, they don’t measure the quality of your performance in the short term.
These are 5 crucial tips that’ll help you analyze your trades in an objective and neutral way:
Create Space Between Trades and Analysis
Eliminate Hindsight Bias: Objectively Analyze Your Trades
Replace $ with % or points/pips
Ask yourself: Am I satisfied with my execution?
Predict Worst-Case Scenario
With love,
Sara
Whenever you’re ready, there are two ways I can help you:
1- Eradicate your worst trading mistakes with my E-Book here.
2- Elevate your trading performance with 1:1 Coaching - The Peak Performance Trading Program. See if you qualify here.
Great content! I love the 5th tip 'Predict the worst case scenario' , it actually helps me also manage my risk per trade and to think in probabilities. One can use it as a confidence checker.