Teach yourself to trade – FEEDBACK (part 5 of 6)

So if you’ve read my previous post about adopting some humility you might know that I’ve completely failed to follow this piece of advice myself 😉

It’s a basic rule that if you don’t measure something then it’s unlikely you will improve at doing it… or… if you do improve it’ll be at a slower pace. If you’re not keeping records and measuring the activities you’re undertaking then how do you know whether you’re going in the right direction or not?

In order to have feedback that will help you course correct you need to record what you’re doing.

Rather than use excel I went slightly overboard and am using Filemaker (database creation for idiots) to record what I’m doing. There’s another table linked to this which helps me calculate risk/reward and whether it’s actually a credible trade. Will post this later at some point when I’ve got it all working smoothly.

Apologies for the picture quality. I’m hacking things from PDF’s, through ‘theGimp’ and back into a better size in order to create this.

So this (above) is more like an aim, an ideal, rather than an illustration of what I’m doing at the moment – also – all the crap you see on this chart from 5th May is no longer there…!

This is more like it…

So the moving averages exist just to help me spot trends because I’m still a little retarded when it comes to seeing the obvious. Here I want to see either a bearish engulfing bar back near 1600 to confirm a short or slightly less aggressively a drop through 1516/1500. Or the price could bounce off 1538 again with up-side resistance at 1650/1670… we’ll see. Anyway it’s certainly in a downtrend… probably best look for shorting opportunities eh?!

This is slightly off topic (feedback)! Right, so feedback is insanely important because you need a mechanism to determine what’s actually happening without relying only on your P+L

    1. Your opinion of yourself/abilities isn’t objective. If you’ve read any of my stuff in this blog, tried to diet or committed to an exercise program you’ll know this. My opinion of myself and the fact I’m awesome is unlikely to be totally objective. You will undoubtedly have the same issue 😉
    2. You need to know that you’re sticking to a system before even considering whether the ‘system’ is working for you or not. This probably means 30(?) trades with a single system before you can know whether it’s one you can stick to and if it actually performs in the real world.
    3. Contextual feedback is important – is this trade type working only in a certain type of market? I’d suggest that short trades have maybe a higher likelihood of success in a falling market. Now, actually the only way I would have to validate this idea over the long term would be using some sort of feedback. Gettit!?
    4. Feedback is what helps you learn and get smarter in the long term. It’s what should essentially prevent that bruise on your forehead from getting bigger. My head hurts from banging it against the wall – oh, I guess I better stop that then 😉 For trading I suspect the following is true..
    5. Help you identify personal trends i.e. by doing x,y,z at an emotional level then decision making seems to be more successful. Yes, everyone talks about the importance of keeping a trading diary. Have I been doing it? Nope, not until now! Putting all this stuff into a database seems the most efficient way to keep track of everything
    6. Recording trades and putting everything into a system also means you treat this whole topic as if running a business and not simply having a punt. Businesses keep proper records

Better records = better feedback = shorter learning curve + better ideas for later

Here’s a final feedback analogy to put the final nail in the coffin…

I enjoy going to the gym (weights) and since I started recording what I’m doing, weight (lifting) and how much I weigh my actual results and progress has been double what it used to be when I didn’t pay attention to recording what I was doing. I was in the gym, yes. I was working out, yes. What I wasn’t doing was either of these things at peak efficiency. So I got a bit disillusioned and pissed off as well as tired… I almost gave up…

Get to this point with trading and it may well be game over.

After I started recording what I was doing it was remarkable how quickly things improved. You can go after something with a record of where you’ve been. You’re aware of the pitfalls and things you shouldn’t do. All previous mistakes, trades, gym sessions, whatever are there to learn from.

So, if there’s one ‘secret’ of trading I’d suggest it’s keeping really, really good records of what you’re doing. Now I’ve managed to explain this to myself and convince myself it’s a super idea which will help me get an ‘edge’ I’ll be doing that then 😉

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3 thoughts on “Teach yourself to trade – FEEDBACK (part 5 of 6)

  1. Chris Chillingworth

    Hey Rob. Interesting post. Completely agree with the importance of recording. I’m a bit of a data analysis nut. I love charts and graphs and rows/columns of data which all paint diffeent pictures, often of things you may not have seen before.

    Last night I made some tweaks to my data records and began recording the amount of positions i’m opening and closing per month. Very basic stuff I know but the point for me was to try and understand if there was a link to this and the amount of losing trades i’m making. (I have suspicions that my losing trades are too high and I need to cut them down a bit more to allow my successful trades to outweigh them).

    Interestingly enough I found that in April & May I opened something crazy like 12 new trades. My system would suggest I should only be opening something like 3-4 new trades a month. Letting the losing trades close from the stops and letting my successful trades run until they hit an exit point. Analysing the data from a different perspective showed me where I was going wrong and in June i’ve cut it down to only 5 new positions opened this month.

    I’ve therefore learnt that I need to wait until July before I now open anything else.

    Data and records can provide such a wealth of info, and from a completely different perspective sometimes. I’m quite interested in the software your using too. I know zilch about databases but from what i’ve read of your blog posts it seems quite entry level friendly, might have to fetch myself a trial copy sometime soon.

    Good luck with your trades pal.

    Reply
    1. robertsweetman Post author

      Hi Chris

      Yep, certainly a big fan of excel myself but wanted two additional features out of something with a little more ‘depth’

      1. Ability to record/save chart pictures as part of a record – this doesn’t quite work in excel!
      2. More analysis options and multiple tables for tracking repeated buy/sells on stocks

      Couple of caveats with Filemaker though. Firstly, it’s £260 for a license, which is criminal considering how little I’ve used it over the last few months – my bad! Second, not being used to a MAC based UI it frankly gets on my nerves (initially) but now I’m over myself and it’s excellent. Some of the setup is quite fiddly but i’m treating it as a learning experience.

      When this is more ‘how I’d like it’ I’ll make the template available. I’m also looking at introducing some automated filter rules into the background of my database so if certain criteria are met there’s an ‘ok to trade’ flag or something gets set. Such wizardry is beyond me right at the moment. 😉

      Outside of this I’m having massive time management clashes with the day job so expecting to set aside most of the weekend to re-organise this part of my life and place some trades on an EOD+ strategy I’m borrowing from Malcolm Pryor’s book ‘Winning Spread Betting Strategies

      All these trades will be analysed and recorded in Filemaker with proper explanation blog due on Sunday/Monday. Yep, lots of patience required… ugh!

      Reply
  2. Chris Chillingworth

    thats 12 new trades per month by the way over April and May. so 24 in total. far too many for a long term trend follower like me. i suspect its a result of wanting the success to arrive asap. again, patience is another skill I need to work on 🙂

    Reply

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