Previously I blogged about the importance of reflection in trading. And I do that alot. I do it weekly, and monthly, and during drawdowns, perhaps every 3 months, but I try to reflect as much as possible. Simply because it is the best way to learn.
June has been a good month so far. And I’m not just talking about the numbers. I’m talking about the lessons.
As a reflective trader, I’m always looking for ways to improve the process. And to try new things. Because there is no such thing as “the only way to trade”. Why do you think prices move? It’s because people are trading thousands of ways giving them thousands of signals on different timeframes. The only one way to trade, is your way.
So coming back to June. I experimented with several things with my trading. One is adding trailing stops once the move has gone about half in my favour, and another is to place breakeven orders when the price is about halfway towards my target price.
I’ve always been experimenting with these two, and through reflection, and looking back at my records, I don’t see clear advantages, for my strategy.
So I started to highlight when these stops actually “save” me, or make me “lose money”.
The other thing I experimenting with is taking profit early, based on current price action, and oscillators, and day of the week. For example, if it is close to the end of the week and my profit hasn’t been hit, I take profit. Another example, is when the profit amount is very attractive, and I say, “why not, just take lah”, and I close the trade.
The other thing I added to June, late June, is actually increasing my risk, to test and push my stomach for drawdown.
So here are my reflections, and findings, specific for my trading style. Just to share with you the outcome of reflective learning. These are specific to my trading style, so please, don’t take these lessons as yours. I’m just sharing you my own reflections, as examples.
- Break even and trailing stops very seldom “save” me. They make me lose money instead, because of whipsaws hitting those stops, before eventually hitting my target.
- Taking profit, ironically, makes me lose money. As I shared before, it’s important to have a right perspective. And to get the right perspective, you need to reflect, to discover it. While taking profit early puts money in the pocket, I actually lost money because the trade eventually hit my targets. That’s the right perspective to take. I lost money by taking profit. And this is harsh, because I know, losing money slows down the compounding rate, for every week that passes.
- Increasing my positions size from 1% to 2% is starting to eat into me and push me to the edge. So now I know I am still not ready for a 2% position sizing, and perhaps, next month, I will try something like 1.5%, or less. Because I know that to speed up compounding, I also need to try to push up the position sizing, to gain a greater percentage growth per month.
So you see, hopefully, why reflecting, and keeping records, and making it a habit and having the mentality that trading is a job, is very critical to trading successfully. I have met several interested persons in what I do, and I am very happy to hear them tell me “I’ve never thought of trading in this way before.”
Give reflection a try. Keep good records. And reflect on why you took those trades, how they went, and what were some lessons learnt. And keep them. And go back to them once in a while, and reflect if you have made progress. Focus on process more than the results. The results come from process, not the other way round.