Today I want to give you my 9 best tips, tricks and tools that I personally use to help me stay on top of my trading game. I get very practical and share my routine and other tweaks and how I cope with the mental aspect and the pressure in trading.
#1 There is no learning by doing in trading
Let’s get right into it and start with the one thing most people will disagree but if you keep on reading, you will see why I am right – and this is not only limited to trading.
An athlete or a sports team does not become better and improve their skills during a match or a competition. Usually, they are so engaged and focused, that they just recall what they have been practicing. Athletes might respond to things they see during the game and change their gameplan, but they don’t actually improve.
In sports especially, this is obvious and it can be misleading because you don’t see the thousands of hours that have gone into preparation, planning, exercising and honing the skill. We only get to see the star player that steps on the field and makes it look so easy.
The same is true in trading. During your trading day, all you should do is follow and execute your trading plan. ‘Screentime’ as many traders claim, is not going to make you a better trader. Emotions and the stress during live trading can be overwhelming and as traders it is challenging to stay objective, let alone improve your skills during live trading. We will see in a later point when and how actual trader development happens.
#2 Dealing with losses the right way – mental flushing
Losses are part of trading and they can’t be avoided. However, knowing how to deal with losses is important so that you don’t let one loss lead into a large loss.
In the book ‘The art of learning’, Josh Waitzkin explains a technique called ‘mental flushing’ to deal with stressful and potentially dangerous (performance wise) situations. You should remove yourself from your trading computer (in the case of trading) and do something very differently which requires your whole attention and doesn’t allow you to keep thinking about what went wrong. He suggests to go for a walk, go for a run, or do some other exercise which gets your blood flowing.
I adopted this technique and after a loss I immediately close my charting platform and engage in a different activity. Some people might say that you rob yourself of opportunities to recover your losses, but I don’t agree and covering your downside is way more important over the long term.
#3 Smaller circles a.k.a how to become a better trader. Guaranteed.
This is another concept by Josh Waitzkin and it applies to any skill. When you want to learn a new skill, you start with the core basics and the things that will have the biggest impact before you get into the nitty gritty. In sports, you first learn the mechanics of the game, how to pass and handle the ball before you go into the advanced concepts. And even then, you keep rehearsing the basics every day – even if you are on top of the game.
In trading, although many people won’t agree or just not listen, you first need to work on your mental game and your overall discipline and patience. Trying to hunt for better systems or indicators will never turn a losing trader into a winning trader.
You are your greatest enemy as a trader and that’s what you should be focusing on first. Unfortunately, most traders will skip over this tip, but this is exactly what will keep them from trading profitably.
#4 Bulletproof entries with checklists
How often do you talk yourself into a trade you should not be in? If you are like most traders, this is probably a big portion of your overall trades. The fear of missing a trade, second-guessing your systems, trading out of boredom or because we want to make up for past losses are performance killers and they lead to impulsive trade entries.
A physical checklist which states your entry criteria one by one forces you to take the finger off the mouse for a few seconds and think through the decision you are about to make. It sounds simple but it works. It is much harder to lie to yourself when you see in front of you that the trade you want to take is not in line with your system. I have a checklist in front of me every day and I go through each point before I enter – it really makes a big difference.
#5 Price alerts to reduce screentime
I have been preaching this for months and price alerts are the most overlooked and misused trading tool. Price alerts can make a huge difference in your trading because they eliminate the need to stare at charts all day long. Simply place your price alerts at key price areas that would signal a potential trade, close your platform and only come back if the alert goes off.
This does two things for you: first, you won’t miss trades anymore because you are not paying attention or don’t have a real process and, second, you are not glued to your charts and tempted to do ‘stupid things’ just because you are bored and flip through timeframes.
#6 The screenshot collection hack
This is a great tip for technical traders. Start collecting entry and exit screenshots of your trades. If you trade only a few patterns, you will quickly be able to judge the quality of your trading by going through your trade screenshots. If your trade screenshots look very differently, you are probably not following your rules very well; as a technical trader, following just one (or a handful of patterns), your trade screenshots look very identical.
The exit screenshots help build confidence and allow you to improve your trading. In the exit screenshots, look for the following things:
- Did I exit my trade based on my system’s rules or did I act emotionally?
- Do I cut my winners short and could I let them run longer?
This is an easy hack, but it will help you boost confidence in your system.
#7 Know your method inside out – Trading plan & watchlist
I do it every Sunday and although writing trading plans takes me roughly 3-5 hours, I would never start my trading week without having done my watchlist and written down trading plans. There are two things that happen once a trader starts creating watchlists and writing trading plans:
- You really start to understand your trading method and it forces you to overthink your rules and your approach. You’ll quickly notice that you don’t really know your trading method if you don’t know what you are looking for.
- Over time, you can compare your trading plans to what has happened in reality afterwards and how you executed your trades. If you notice that your plans are accurate but you keep missing trades, you have to look into your routine or work on your confidence.
Read more: How I create my watchlist
#8 Find what’s REALLY holding you back
Most traders don’t really know why they keep losing money and they (mis)belief that their system isn’t working, or maybe they are on a wrong timeframe or that their indicator is bad. However, they have no way of really validating their thoughts and suspicions.
Even worse, those doubts lead to ‘system hopping’ and whenever I ask traders if they have changed their trading approach over the past few days/weeks, I usually get a yes from 80%+ of the traders. Many traders will repeat this cycle for years where they jump from one method to the next, looking for something which they don’t even need.
Without a proper auditing routine or a journaling process, you are lost. Without a way of recording what you are doing, it’s impossible to improve. If you don’t know what you are looking for, you won’t find it. A trading journal will show you exactly where you are going wrong.
#9 Journal – The most important tool for a serious trader
If you still haven’t given up, I am proud and you are probably ready to make a change in your trading. A trading journal is the ultimate tool that separates the professional from the amateur. I am the first to admit that keeping a journal is work and that’s why most traders won’t do it.
I journal my trades at the end of each trading day and it provides me with an opportunity to objectively look back at my trading. When you have to enter for the 10th time that you broke your rules and lost a bunch of money, it hurts and it’s annoying to see your failure but there is no better way of becoming aware of the problems in your trading. Most traders close their eyes and tell themselves that they just need a better method. A journal is the ultimate lie detector and it holds you accountable.
Self-check: Do you treat trading as a business or a hobby?
Now it’s the time to put this to the test. Do you recognize that YOU are the one screwing up, do you accept that your approach to trading is not reflecting your goals and do you acknowledge that you are not professional enough? If you say yes AND are ready to start putting the tips in this article to use, you have a good chance of making it. If you prefer to keep doing what you have been doing and think that this article is nonsense, you will come to a rude awakening.