How to Revise and Troubleshoot Your Day Trading Plan

Strong discipline is key to success in trading, but only if you’re disciplined in following the right system. If your trading method is flawed, sticking to it is going to hurt you. If something isn’t working, don’t get mad at the system; take some responsibility and make some changes.

How do you figure out whether your trading system is right and what changes to make? Go through your trading diary and ask yourself some questions:

  • Why did you choose this system? What is the market telling you about it? Is it telling you that the system works if you follow it, or is it telling you that something is wrong with the underlying assumptions?

  • What works for someone else may not work for you. There’s no flaw in admitting that you made a mistake and that you need to make a change.

  • Were your mistakes because you followed the plan or because you didn’t?

  • What part of the system is causing the trouble? Are you having trouble identifying entry points or exit points? Or are you stuck when the time comes to enter the trade, causing you to miss a point? Or do the trades your system identifies never seem to work out? When you know where the problem is, you can change it.

  • Can you improve your trade efficiency? Is there a way to reduce the number of mistakes? Would automating some or all of your trading help?

One way to get your confidence back while still staying in the market is to trade in very small amounts so that your profits and losses don’t really matter. Trade 100 shares, not 1,000 shares. You give up the upside for a time, but you can also get out of the cycle of greed and fear that has destroyed many a trader.