How exactly the TC Journal identifies my biggest psychological mistakes

When I was using spreadsheets, I would often wonder if it was actually helping me improve my trading.

Sure, almost every trading guru on the planet talks great lengths about journalling and some even prescribe what tools to use (like spreadsheets).

But a vast majority of them fail to explain how exactly you can understand what you did wrong across a number of trades

You can’t ever understand what you did wrong for a single trade and assume your magically cured you’ll just ‘remember to not make the same mistake again’.

What you need to understand how often that error occurred across a number of trades and put in procedures and processes in place to ensure that mistake doesn’t happen again.

Not just that – if you truly want superior results you need to track the multiple sources of errors that could arise and see which is your most common ones across multiple strategies on multiple markets.

When I kept a using a spreadsheet, I noticed that I would find some excellent insights into what I did wrong or areas for improvement for a particular trade in my analysis, but i could never ‘zoom-out’ and look at the bigger picture of my trading and find out how often I made that mistake and what I could do to prevent it.

Spreadsheets just simply wasn’t the right tool for that. Neither was Word, Evernote or any other tool I used for that matter.

Remember – having a profitable trading strategy isn’t enough. You need to execute it perfectly and with discipline to ensure your meeting your goal. 

The Trading Consistently Journal was built for exactly that – to help you discover what your doing wrong across multiple strategies, multiple markets and multiple trades with methods to built in to prevent you from making the same mistakes again.

Let’s cover how exactly how the journal helped me to identify my own psychological mistakes -

Understand your individual psychological make-up

No two traders are the same, each trader when faced with the same situation will react in different ways. It’s essential you understand your own individual psychology and what bad patterns you keep repeating.

In the past this used to be extremely difficult without a trading mentor (or someone as wise as an ordained monk), but with the Trading Consistently Journal, its easy.

improvetrading

Believe it or not, my problem wasn’t losing (I fixed that by re-framing my thoughts) but winning too much! Every time I won consecutively I would be over confident in my abilities as a trader and enter in sub-par trades (before I started journalling I somehow subconsciously convince myself at the time of entering the trade was a good idea). These sub-par trades would damage my account, then I would risk even more to ‘regain’ that damage. The end result was disaster.

So how did I fix this?

Step 1. I tracked it

In the Journal I first edited my trading plan and inserted a new field called ‘Over confident’ to track exactly how many times I committed this mistake.

overconfidnt

click to view

Step 2. I kept on journalling

I would continue to Journal all my trades, as I usually do before I enter each trade as well as the trade outcome. After the trade was completed I would determine if I was over confident in my trading (ie. took on extra risk, ‘bent’ my rules slightly etc). If so, I would tick it in my ‘mistakes log’.

enteroverconfident

click to view

 

Step 3. I would review my trades

At the end of each month I would make a rule to review my trades and see where I could improve. I used the Dashboard to design a new chart to show me my biggest trading mistakes so far. From doing this over a sample of trades it was becoming quite clear that over-confidence was a significant issue for me and was causing me the most losses.

addnewreport

click to view

overconfidentchart

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Step 4. Prevent it from happening again.

Once I knew what the problem was, I put into plan immediate action to prevent it happening again. I setup a new rule in my trading journal to take a break after three winning trades. I also inserted into my pre-entry checklist a rule to review my entries twice if I won the prior last three trades. Since I completed the pre-entry checklist my journal BEFORE I entered each and every trade I now knew to be careful before each trade and actively prevented myself from making the same mistake.

takebreaks

click to view

reviewchecklisttwice

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Step 5. Reframe my thoughts.

I would then consider why am I acting like this on a psychological level. After a bit of thought, I came to realise I attach my confidence in my trading to the money in my bank account. This is bad. Although this is a typical measure of success in trading industry it can ultimately destroy you because as you lose money, you lose confidence then you lose more money. But the truth is that any individual trade is a random outcome. There are times where you have a string of losers or a string of winners. You can only be confident in a system over a series of at least 100 trades. So ultimately my confidence should be how consistently I apply my strategy, because that’s all you can actually control. With that in mind, I added to my affirmations list which I read before every trade:

confidence

click to view

(Lucky for you, you already have this in our own Journal and if you view it for more then 21 days it’s scientifically shown to change your perceptions.)

It’s now been some time since I have committed this mistake, although it can happen once in awhile it doesn’t destroy my account like it used to, so I’m thankful.

So there you have it! Got some ideas of your own? Login now.

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Sow Behl

Sow is a 6 year trading veteran primarily trading FX and equity markets making 1982% return in 2014. After spending years and countless failures trying to find the elusive holy grail lead him to discover elements of what truly makes successful trader. Sow founded the Trading Consistently Journal as a mission to help all traders understand and improve their trading psychology, discipline and consistency. Learn more.

7 Comments

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