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5 STEPS TO IMPROVE YOUR TRADING
RESULTS TODAY

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5 STEPS TO IMPROVE YOUR TRADING

RESULTS TODAY
 Oct 22, 2017 /  admin

1. DEVELOP AND FOLLOW A WRITTEN TRADING PLAN

Plan your work and work your plan.  Successful businesses have
written operating plans. Winning sports teams follow a written
game plan. The best traders approach trading as a business, and
emotional trading can be very detrimental to your long term
success. By developing and following a written trading plan, you can
focus on avoiding things that have proven costly to you in the past,
and work on repeating that which has been pro table. Often a
written trading plan can help one strive to eliminate repeating
costly mistakes in their process, or in many cases, actually just
establish a process. Basic items to address in the planning and
development phase include, but are not limited to:

Tradable Markets - Identifying which markets to trade or exclude

helps narrow the focus of the trader and allow them to dial in. I
trade U.S. Listed stocks with a market cap and volume minimum 

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requirement and certain higher volume ETFs. I do not trade futures

or options.

Time Frame - Day, swing, or longer term position trader. Some may
opt for more than one, but as I discuss in item 3, I prefer to focus on
one method and time frame.

Risk Structure - Overall portfolio risk (heat), then narrow it down to

risk limits by market, industry, and then individual position risk
limits.

Entry and exit signals - Speci c rules for entries, stop loss levels, and
exits from winning trades, whether scaled or all in/all out.

System Parameters - What are the return goals for the accounts
and what are the drawdown thresholds? Once a trader sets a
realistic return expectation, they can start to set up position limits
in line with the return expectation. On the other side, many traders
stop taking new positions for a speci c time period if they reach a
pre determined drawdown level.     

2. ESTABLISH REALISTIC RETURN EXPECTATIONS

One major reason that many traders fail or wash out is because
they have unrealistic return expectations. Many think it should be
easy to double an account in a year or less because it is smaller in
size, maybe $5,000 or $10,000 as an example. What they fail to
realize that in shooting for extraordinary returns, they often take
on extraordinary risks. What percentage of professional  fund
managers achieves 25% a year on a consistent basis? Novice traders
often think they can achieve that return or more because of a
smaller account base. If it were easy, everyone would do it. The fact
is if their account is just pro table for the year, they are ahead of
the majority of traders. While many traders scoff at making 2% in a
month, the fact is over the course of a year, just 2% a month, on
average equates to 24% for the year, which would put one in the
upper echelon of traders over time. 
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3. MASTER ONE MARKET, STYLE OR APPROACH

"He who chases two rabbits catches neither" - Chinese Proverb.  Trading
is a very dif cult endeavor, there is nothing easy about it. A trader
who focuses their time and effort on one speci c market, style or
approach greatly increases their chances of mastery and success
than one who tries to trade many different approaches. Specialized
knowledge has been said to be a key character trait of extremely
successful individuals in any endeavor. While the ability to get
unlimited nancial news and data 24 hours a day, and execute
trades with the click of a button seems to offer bene ts, in reality
more often than not it dilutes the traders performance. There are
literally dozens of ways to trade pro tably over a variety of
strategies and time frames. A trader only needs to excel at one.
Ideally, a trading style needs to suit the traders personality. There is
no one size ts all. A very good shorter-term trader may not be able
to execute a longer-term trend following program well, and
someone wired to be a longer-term trader may not be able to
execute a shorter-term strategy. The key here is to nd a trading
approach that is conducive to the traders personality. 

4. UNDERTRADE

Billionaire trader Bruce Kovner said novice traders often trade

three to ve times too big, and one of his key pieces of advice would
be to under-trade. Likely the single biggest reason that traders fail
is overtrading. Overtrading does not only mean trading too
frequently. It also can be trading too many open positions, markets,
or setups. Having too much open risk in their overall accounts, or in
positions. Having too many correlated positions, looking at charts
and data too often, or any combination of these. Cutting winning
positions too early is also detrimental to long term performance.
Big winners are needed to offset the inevitable losing trades and
create excess return. Traders often overtrade because they have
unrealistic return expectations, as discussed in item 2, and think
they need to take excess risk to achieve their unrealistic return
expectations. Dialing back my trading frequency and size drastically 

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increased my returns over time as drawdowns became more

shallow, I learned how to sit in big winners longer and my losing
trades had much less impact. 

5. JOURNAL AND TRACK EVERYTHING

What gets measured gets improved. Steps 1 through 4 in this post

lead to Step 5. Once a comprehensive, written trading plan is put
into place which identi es all aspects of the trading process, and
realistic return and risk expectations are established, the trader can
track and evaluate their progress and performance. Tracking each
trade, each closed position and performance stats can help a trader
objectively identify strengths and weaknesses in their trading
program. This step can help them re ne and steps in their process
which may need to be reworked, improved or eliminated. Does a
speci c strategy, market, or time frame perform much better than
others? Are there any common traits in winning trades and losing
trades? What I have decided to do over time is focus on my
strengths and improve or eliminate any areas of weakness. As I
realized over time that I was not pro table in shorter term
discretionary trades, options and futures, I eliminated these form
my approach. By tracking my progress, I learned that my strong suit
is intermediate to longer term position trades using stocks and
ETFs. I decided to narrow it down to my strengths, focus exclusively
on that and stopped trying to excel at other strategies.

This is a brief overview of 5 items that have helped me improve my

performance over the years, and are fairly simple to implement. 

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