Thursday, February 16, 2017

Five Key Questions Traders Need to be Asking

Here are five helpful questions that traders too rarely ask:

1)  What was the price path of what I was trading *after* I stopped out of the trade?  Does my exit execution actually add value?

2)  What has been the price path of what I've been trading after I entered the trade?  Does my entry execution have positive expected value, or am I better off entering in a rule-based, mechanical fashion?

3)  When I've added to trades, what has been the P/L just for those added pieces?  Does adding to trades truly add to my profitability?

4)  What has been the price path of trades I decide to not take because of lack of conviction?  Does my conviction in an idea truly correlate with the profitability of trading that idea?

5)  How does my P/L behave after I've had a string of winning trades?  A string of losers?  Does recent performance affect my trading, and--if so--is that impact positive or negative?

Tough to come up with answers for better trading if we're not asking the right questions.  

Perhaps the best question of all:  How much time do you spend studying your trading vs. studying the markets you trade?

Further Reading:  Preparation and Success