Let’s be real for a second… there’s a lot that goes into every one of your trades!
The preparation. Choosing the right stock. Monitoring it. Reviewing it so you can improve in the future. If you have been going through my Investing for Beginners series, you already know about all this.
You have to gain knowledge and practice your skills before you start to trade in the real markets.
But once you start trading, does the fine-tuning process stop?
Should you just trade in autopilot mode now?
Of course not! You still have to constantly improve.
And that happens by reviewing your trades.
As you’re trading, it isn’t feasible to constantly review your trades and that is why it must happen after. Think of sports as an example. You train so long for a match but when you’re playing the match, you don’t have the time to review your every move.
You make your moves based on muscle memory. Like you know what you are doing. You give it your best using the training you have received and the preparation you have done. You apply your knowledge in the moment. You’re not really thinking about the technicalities.
In order to improve your performance for future matches, you must do a post-match analysis.
Similarly, when it comes to trading, when you’re actively performing the trades, you’re in the flow. You’re not analyzing every move. There’s never enough time to do that. You can’t think about each move before you make it. So you work based on knowledge and then review later.
One of the best and most important ways to constantly improve and level up your day trading is to review your past trades. To analyze what went right, what went wrong, what you can improve, and what mistakes you made. Post trading analysis is better than analyzing your trades in the moment because you’re not influenced by the emotions of trading as you’re trading.
Think of it as a trading journal: to track your gains, losses, and ideas for improvement.
Today, let’s talk about how to review your trades.
There’s a method to the madness so let’s go through the details.
How (and WHY) To Manage Your Trade Data
After a day of trading, it’s natural to feel overwhelmed by all the steps you took—you might want to put the day behind you. You can get complacent and stop keeping track of what’s happening. You would just want to get on with the next day and then days pass you by and before you know it, it’s a new week and a new month.
By now you’ve forgotten what happened last month and have no idea what to improve upon.
And so reviewing your trade data is crucial.
Keeping a record of what you did, how it affected your trades, how well your strategy worked… not only keeps you on track but helps you refine your strategy.
At the end of the day, trading is a business. It is YOUR business and no business can survive without growth. You must do everything you can to maximize your business’s potential.
Day trading is also competitive. It isn’t something you do in a bubble. You’re competing with several others who are part of the hustle. You have to level up your hustle.
Before you review your trade data it should be managed (aka be in a format). This is an important step. But most of the popular trading platforms don’t provide this functionality.
This is one of the reasons why we created StockCraft.
So YOU can review your trades from inside the platform!
At present, within StockCraft you can go over your paper trades. As we have discussed before, paper trading is an important way to practice your strategy and improve your performance. So while you’re paper trading you can also review your moves so when you actually live trade in the market you’ll do it better.
In the very near future, we will have numerous brokers added to the platform so it will be possible to review live trades as well.
Meanwhile, you can also track your trades with a spreadsheet. It should be as simple as having the columns for ticker, entry, exit, P&L. You can calculate your performance based on the change in the stock’s price and percentage return on your trade.
All this will, of course, become easier and more efficient with StockCraft (click here to join).
How To Outsource Managing Your Trade Data
Because managing your data is such a crucial and important step, of course we now have services that can do it for us. These services connect with your brokerage account, go through your statements, or allow you to upload your statements to be read.
These services format your trade history into a collection of tables, charts, and graphs, along with calculating important statistics.
Having this collection of charts and graphs helps you spot not only mistakes but also see how well you follow your strategy. It can also help you spot where you need to refine it.
These records are significant to track your own performance, and they make life a lot easier when tax time comes.
As I mentioned before, you can do this in paper trading in StockCraft, and very soon you’ll be able to do this with live trades too.
So get on board soon if you want an optimal solution to manage your trades.
How To Manage Your Own Trade Data
Now that we know the importance of managing your data and that you can outsource it, it’s important to know that yes, you can do this yourself instead of hiring a service/platform.
A common method is to create a spreadsheet with the data you desire to enter and manually put it in—ideally on a daily basis.
There isn’t a right or wrong way as such. It comes down to preference. There are both pros and cons to taking responsibility for this:
- If you choose to manually update your spreadsheet, it gives you direct access to the trades you make each day. You’re closer to what you do.
- It also helps keep you disciplined as you have to do this regularly (ideally each day).
- You also become more mindful of the trades you make (again, you’re close to the process).
- A manual approach like this can get tedious if you’re a highly active trader.
- Doing this manually can introduce chances of error (this isn’t your skillset).
- Above all… time! It takes time and commitment to keep on top of this.
If you go the route of an automated paid service, you can instantly import the week’s trades and have a look at your top-level indicators like your equity curve and profit factor and that is that.
How To Review The Big Picture
At this point, you have in hand your trade history in a readable format to analyze your trades.
There are some key performance indicators that show us how we’re doing in our trading overall.
They show us the big picture. These key performance indicators are:
- Profit Factor: The profit factor is the realized reward risk ratio. For example, if you have a profit factor of three, it shows your total gross profits are three times higher than your total gross losses.
- Sharpe Ratio: The Sharpe Ratio tells you more about your return on investment as opposed to risk. It’s a means to determine how much the return is per unit of risk. Ultimately it’s a good tool to evaluate your performance and your chosen strategy.
- Equity Curve: The equity curve is essentially a graphical representation of your running account balance over a period of time. You can look at this chart and see if you’re trading well or need to improve something. A positive slope of the equity curve suggests the account is profitable while a negative slope shows weak performance. The equity curve is essentially your rolling P&L over time.
These are the 3 main metrics to pay attention to evaluate your performance. These 3 metrics, individually and combined, give you the overall picture of your performance.
The profit factor tells you the ratio of the profit with respect to loss, the sharpe ratio evaluates profit in comparison with risk, and the equity curve graphically represents in which direction your profit’s moving.
The common theme in all 3 is that they tell us important information when it comes to profit.
And that is a good indicator of whether your performance has been negative or positive.
If your profit is lacking, then you have to rethink your strategy. If your profit is consistently good, you need to put your efforts into staying focused on your strategy and maximizing its potential.
How To Review Individual Trades
Let us talk about reviewing individual trades.
This is where you break down individual moves that you make while implementing your strategy. In a nutshell, the individual trade review is about evaluating your implementation of said strategy. To evaluate the strategy as a whole we have the big picture review.
Combining both these types of reviews, you arrive at some key insights.
To get there, you have some questions to ask yourself:
- Should I have made this trade in the first place?
- What goals did I start with for this trade?
- What were the market conditions at the time of the trade?
- Basic entry and exit rules: did I stick to them?
- Were there any warning signs I ignored?
- Scaling in/out: did I stick to my own guidelines?
- Did I ignore any of my rules? If yes, why?
- What was my state of mind?
If you look at these questions carefully, you realize they’re important examinations that you should do at each and every step whilst trading. But because you were in the moment and focused on trading, you couldn’t pause to ask yourself these.
These are questions that are important to ask in hindsight so that you can make better steps in the future. This set of questions is a good checklist to have, which I follow myself.
What This Looks Like in Action (Reviewing Freedom Challenge Students)
Recently, three of my students from my Freedom Challenge course made it to the top 7 on the leaderboard of Kinfo—as you can see below. Today let’s talk about two of those three students.
In a recent video on my YouTube channel, I went through the trades of two of these students. I suggest you go through this video and see how I reviewed their trades.
I looked through their trades and here are some of my observations:
In the case of the first student (SexyShortSeller) that I reviewed in the video, they made profits of $265K. Going through their trades, however, it was clear they could have made even more if they kept their losses low.
What could have been better was mainly the stock selection. As I’ve said before, your stock selection plays a huge role in how your trades play out.
For instance, you shouldn’t even be choosing to trade on stocks less than $5!!
All of these losing trades (CYTO) in the screenshot below were avoidable.
The RIVN and AFRM trades were also avoidable as they’re too expensive and give very little returns.
What this student should be doing right now (and what you need to keep in mind in future) is track all your stocks under $5 and over. Track all your losses and wins to see if you’re actually profitable or not.
All the losses taken by this student are on stocks that are too expensive or too cheap. There were profits too but the number of losses made the overall gain pretty small. There could have been more gains if losses were kept in check. This goes to show that even trained students can make mistakes (and why you must continue to review your trades at all times).
We can also see this student traded the same stock over and over expecting a different result.
This is just sheer overtrading, something you need to avoid.
If you see yourself trading the same stock and getting the same result again and again in your review of your own trades, you know what needs to change. As soon as the stock breaks in the morning high, you should stop trading.
Even after making these mistakes, this student still made it to the top 3—which goes to show that with the right mentorship and guidance, you can make extremely good profits!
Despite the inaccurate stock selection and overtrading, this student made some good profits by bouncing back (proving how important it is to learn from your mistakes).
This is why reviews are important so you can keep improving further.
Let’s look at the trades of the second student in the video (J_35).
Notice in the screenshot above that this trader stopped trading after the loss on PPSI. That shows good discipline. Stopping at the right time keeps losses in check and stops you from going down the path of overtrading.
The key is to develop good habits and stick to them.
Of course, this doesn’t happen overnight. It takes months and years of practice and constantly improving yourself—which comes by analyzing and reviewing your trades.
If both of these students keep the same trading habits that they have now, then the second one will surely come on top. The first student can and should of course improve by working on discipline. These are the insights only reviews can give you.
If you don’t catch your own mistakes you’ll never know and continue to make the same trades.
Your Next Steps…
By now you know the importance of reviewing your trades. It’s a great idea for you as a trader to make performance review a habit.
This is something you need to commit to for your own improvement.
I would also recommend taking the guidance of a mentor. My students get the benefit of me reviewing their trades whenever possible and helping them smooth out any kinks in their strategy.
There is immense power in having a mentor.
If you’re interested then connect with me to take the benefit of my program. It’s an investment I encourage you to make for yourself, your development, and your full-time day trading career.
I’m devoted to mentoring ambitious traders to make day trading your primary source of income.
I also invite you to take a few further steps with me:
- Subscribe To My Youtube Channel: this is where I share practical day trading tips and training on how to trade, as well as behind-the-scenes insights into the trades I make.
- Join My Newsletter: I write these emails for people who want to learn the basic Day Trading Tips and the practical steps they should take to get started.
- Join The Freedom Challenge: This is my flagship program for traders who want to level up and learn about the techniques I use, how to use them, and what to do to turn Day Trading into their primary income stream.