In this article we discuss the importance of tracking your trading data: first, the mechanical data; and the second, internal data.
Documenting your trading is a roadmap to success
If you have been trading and investing in the forex, futures, and stock market for over a month and have attended trading classes and investing courses aimed at supporting traders in getting market knowledge and experience, which is so crucial to recording positive outcomes, then you must have heard of the critical nature of documenting and measuring your trades. You can only improve what you measure. This implies that to succeed in trading, you must document your trading data. Also, tracking your trading data demands that you have a scorecard for both types of data. There are two kinds of trading data: first, the mechanical data; and the second, internal data.
Most traders keep track of mechanical data. It comprises your actual trading mechanics, news information, execution-oriented charting, analysis, processing, targets, stops, entries, exits, etc.
Internal data comprises your thoughts, behaviors, and emotions; i.e., what you think, what you feel emotionally, and your unconscious beliefs that drive your trading outcomes. However, many forex, futures, and stock traders do not embrace the internal data's information with similar vigor as they do with mechanical data. And to be a successful trader, you must attend to both types of data as they play significant roles in all your trading decisions.
So, while documenting, you will need to consider both types of data, although through two separate journals. You can keep the mechanical data in a Trade Log. This will entail your initial plans with your rationale about the trade you are considering to enter. Documenting your initial plan and its implementation offers data that helps you compare your initial plan and the results, ultimately identifying your weaknesses and strengths. When you record the elements that you invested in executing your trading plan accurately, you will be exposed to a comparison between your actual execution and what you "hoped" the situation will be. This, therefore, places illusions and your actual skill at loggerheads.
As humans, we are impulsively driven by greed and the desire to dominate. We always want to get and keep what we want easily. However, this, most times, constitutes unintended and negative consequences that are often destructive. Similarly, as humans, we are not naturally wired to be self-disciplined or accountable. And this is why we need rules, laws, limits, and boundaries in our society. Trading needs self-imposed limits, which must be created through personal accountability. To create effective self-control and self-limits, you must know your demands about strategies, protocols, and rules.
Let us take a look at a few things to note while documenting your mechanical data:
i. Documenting your success:
What is your rationale and plan for this trade?
What are your demand and supply zones?
What enhances your odds for this high-probability trade?
Did my stop loss hit after the trade, or did I exit the trade myself?
How long did I stay in the trade?
ii. Compare your mechanical results with your trading plan (log):
Where are the inconsistencies and congruence?
Is anything different other than what I expected or planned?
It is essential to identify the strengths and weaknesses of your executions. This aids in the creation of supportive behaviors and new habits (where needed).
A thought journal reveals constructive and destructive thought patterns and the emotional drivers of internal data. You must identify your faulty thought patterns, which causes behaviors that are inconsistent with your objectives. For instance, abrogation of the plan, violated rules, or abused commitments.
After identifying your bad behaviors, which are often violations of the rule(s) or lack of follow-through, isolate them. This may cause you to make yet another rule to exert greater specificity in your process. When addressing these destructive behaviors, employ mental tools and techniques similar to those taught in our live trading classes to support effective ways of modifying the behaviors a trade at a time. It is difficult to control your emotions and thoughts. This results from the unconscious and deep-seated nature of the programmed patterns that cause unwanted behaviors. The aim is to have a mindset that identifies how the behaviors reflected foggy thoughts and how those thoughts and emotions co-work to create outcomes. Knowing this helps in getting and maintaining a focus on the most critical elements in the “next” trade in order to stay on target, on task, and on purpose while trading forex, futures, and stocks. You can tailor your losses and position yourself to re-observe the flow of order without your emotions interfering.
Below are a few questions to guide the documentation of your internal data:
Why did I fail my plan?
How did I feel?
What did I believe or think that prompted the emotion I felt?
How could I have managed this both now and later?
When you start tracking this data, you’ll notice over time, the emergence of your patterns of feeling, thinking, and executing. This internal data provides information about your process. And this usually eludes your awareness, stemming from programming that includes irrational and limiting beliefs that are connected to negative emotions. These negative emotions ultimately drive these bad behaviors. We can also group these patterns into “personal parts” or “sub-personalities” of your overall self that do not always get along.
Our personalities are formed through learned limitations and achievements presented through our personal life stories. They’re formed through patterned responses to certain environmental conditions such as cultural background, family structure, and others. For instance, your reactions when you are under pressure or stressed and your reactions when you are unthreatened and relaxed may differ based on the current situation.
Different parts of you reflect different program patterns. You aren’t always the same, and how you are is based on the part of you that shows up. Also, your environment, discomfort vs. comfort, biorhythms, and recent events that may have made you doubt your confidence have impacts on which part of you emerges. So sometimes, you’re relaxed and confident while sometimes you are anxious and agitated, or perhaps fatalistic and depressed. Deep-seated irrational beliefs create these emotions. They lead to “who is coming to the trade today” and greatly impact how you perceive events. In other words, do you perceive the reality of charts, or are you “making stuff up?” As a trader, it is ideal to approach the markets in an alert, open, and focused state, resonating, and balancing with the market system. This means remaining in a constant state of observation and curiosity, documenting pertinent observations.
Your Trade Log (Mechanical Data) and Thought Journal (Internal Data) work together to consolidate your strengths and confront your weaknesses. You create new rules to modify your behavior until you sense you are in the trade zone. While consistently supporting your effectiveness by building your strengths and continuously minimizing your weaknesses, you will become more aligned with the market's exact nature – a natural system. Waiting and watching is a form of participation in the market. With experience and the expansion of your capacity for internal alignments between your parts through journal work, you will find yourself aligning with the market. When this happens, you will no longer see the order flow as you “wish” it to be but how it is.
This “feedback loop” of the Thought Journal and Trade Log process provides a blueprint and roadmap of where to go and where to build in your trading so you can accurately see and participate in the order flow without being overly influenced by negative emotional interference. The aim of dealing with emotional interference isn’t to eliminate it. We can’t eliminate the roles of emotions as humans – it is a part of what makes us humans. The point is learning to understand these emotions to contain the negatives and effectively harness and use the positives as allies for boosting the urge to stay on track. We do this to ensure that our performances and behaviors are reinforced instead of being affected negatively. While modifying both the cause and the effect, you will discover where that modification is heading towards. As a trader and investor in the futures, forex, and stock market if you know your weaknesses and strengths, the state you want to achieve, and knowing that you are already en route to getting there, you will close the gap between the market and you. Your natural ability and the market’s natural ability to perform will become more aligned, and the corrective actions to take next become self-evident. Get in, stay in, or get out, stay out.
So, always make your trade log and thought journal ready. Remember that it is impossible to change what you cannot face, just as you cannot face what you do not know. Hence, record, measure, document, and track your market participation. Always bring your A-game to the platform and while in the trade. This is just one of the concepts taught in our live trading and investing courses.
If you want to learn more about professional trading and investing across multiple asset classes such as forex, futures, and stocks, please sign up here for free at our online trading academy www.onlinetradingcampus.com and get access to a free three-hour introductory course.
Author Bio: Bernd Skorupinski teaches the undiluted truth about trading and investing at Online Trading Campus and takes you through what it takes to be a consistently successful trader. His favorite moment as a trading mentor is the way peoples’ eyes light up with excitement and confidence when they understand how Supply and Demand trading strategy works and how it can help win in the trading arena. He believes in building core values and discipline that ensures his students do not succumb to the pressures and temptations of the market. He very much believes in following plans and strategy through. If you want to know more about the author Bernd Skorupinski please read here