Identifying What You Did Right and Wrong with Your Trade
Regardless of the outcome of any trade, you want to look back over the whole process to understand what you did right and wrong. In particular, ask yourself the following questions:
How did you identify the trade opportunity? Was it based on technical analysis, a fundamental view, or some combination of the two? Looking at your trade this way will help identify your strengths and weaknesses as either a fundamental or technical trader.
If more of your winning trades are being generated by technical analysis, you’ll probably want to devote more energy to that approach. If more of your winning trades are coming from the fundamental approach, you’re probably better off concentrating on a fundamental style.
How well did your trade plan work out? Was the position size sufficient to match the risk and reward scenarios, or was it too large or too small? Could you have entered at a better level? What tools might you have used to improve your entry timing?
Were you patient enough, or did you rush in thinking you’d never have the chance again? Was your take profit realistic or pie in the sky? Did the market pay any respect to your choice of take-profit levels, such as stopping short of it, or did prices blow right through it?
Ask yourself the same questions about your stop-loss level. Use the answers to refine your position size, entry level, and order placement going forward.
How well did you manage the trade after it was open? Were you able to effectively monitor the market while your trade was active? If so, how? If not, why not?
The answers to those questions will reveal a lot about how much time and dedication you’re able to devote to your trading. Did you modify your trade plan along the way? Did you adjust stop-loss orders to protect profits? Did you take partial profit at all? Did you close out the trade based on your trading plan, or did the market surprise you somehow?
Based on your answers, you’ll learn what role your emotions may have played and how disciplined a trader you are.
There are no right or wrong answers in this review process. Just be as honest with yourself as you can. No one else will ever know your answers, so you have nothing to lose by being candid. On the contrary, you have everything to gain by identifying what you’re good at, identifying what you’re not so good at, and understanding how you should best approach the market.