Learn the trade here. Make it on tradeMONSTER

Options Trading News

April 18, 2013  Thu 2:14 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
Some of the biggest issues with trading involve skill acquisition and assessment. Research shows that getting better at most things, like playing the violin or skiing, comes through what Daniel Coyle calls "deep practice": 10,000 hours of mistakes and learning to become the best.

That makes sense for physical skills and most mental tasks, including writing, math, and even poker. But trading is quite different.

Unless you are a high-frequency trader, it would be very hard to log anywhere near that many hours. (Staring at charts or tickers doesn't really count.) Trading is also rare in that you can be successful as a novice.

journal41013.pngNevertheless, there are other things you can do to form a solid foundation for good trading. For me, that means having an edge in rules and risk management, as well as a method of assessment.

This is where a trading journal is invaluable. I highly recommend that traders write down all of the above, as you should be able to articulate your edge. You should have rules about the size of your trade and when you plan to get out of it--whether it is a winning or losing transaction. You should also write down your rationale for originating the trade and then examine whether it worked and why.

We at optionMONSTER have a hard assessment of our trading in terms of profit and loss. But that does little to tell the whole story of one's success.

Like most other ventures, good trading is about process, not outcome. Successful trading strategies and programs are profitable in the long term, even if they don't always make money. Many great traders are right only 50 percent or 60 percent of the time, so there will be plenty of instances when your P&L won't tell the whole story about whether you are successfully following your plans and processes.

My best strategies have come from reviewing my trading journals. It is quite easy to forget why we initiated a trade or which strategies are really working. The discipline of a journal can also keep you from acting impulsively and getting into bad positions--even without 10,000 hours of actual trading.

(A version of this article appeared in optionMONSTER's Advantage Point newsletter of April 5.)
Share this article with your friends


Related Stories

SPX

Stocks continue retreat from highs

July 31, 2014

S&P 500 futures are down 0.6 percent. Europe is down across the board, led by a 2 percent selloff in Madrid. Asia was mixed overnight.

SPX

Jobless claims, Exxon results due

July 31, 2014

Initial jobless claims and Exxon Mobil's earnings are the main events on today's calendar. Economists forecast that 310,000 Americans sought unemployment benefits for the first time.

SPX

Stocks rally on strong GDP growth

July 30, 2014

S&P 500 futures accelerate to the upside after second-quarter economic growth and ADP's payroll report beat estimates.

SPX

GDP, Fed, job data lead calendar

July 30, 2014

ADP's private-sector payrolls report for July gets the ball rolling at 8:15 a.m. ET, followed 15 minutes later by second-quarter GDP. The Fed announces its monetary policy at 2 p.m. ET.

SPX

Stocks inch higher ahead of data

July 29, 2014

S&P 500 futures are up more than 0.1 percent, and the Nasdaq is higher by almost 0.2 percent. Europe shows gains of about 0.5 percent, similar to those in Asian markets overnight.

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Education & Strategy

Why traders hedge with sector ETFs

Many people who are not familiar with options think that they increase risk, but their first and primary purpose is...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER