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10 Ways to Deconstruct Your Trading and Build a Better Plan

Aug 14, 2008
When I was a 16, I was absolutely desperate to get a car. My pop insisted that if I wanted to drive, I had to learn to take an engine apart and put it back together until I understood not just the theory of how it worked but had gotten my hands dirty with first hand experience. That was the beginning of many weekends over the years deconstructing engines, figuring out what was wrong with them and putting them back together.

Just like a mechanic, to be successful as traders we need to learn how to diagnose the different aspects of our trading and repair, replace, or adjust them. For some that's a bit of fine tuning, for some its a complete overhaul!

I am convinced from my own experience that to be a profitable trader you have to develop the ability to diagnose, and to take an honest and detailed approach to the different areas of your trading. It doesn't work to be vague or waffly about such important matters as the expectancy of your trading method or your state of focus during the trading day. You have to know EXACTLY what's going on, what your issues are. And it takes a lot of courage, and a burning desire to succeed, in order to face them.

If taking a detailed measure of everything doesn't come naturally (it was a hell of a struggle for me) you have to somehow dig deep and develop the discipline to do it.

Here are ten areas of diagnostic - with questions to stimulate your inquiry:

1. Method

Do you know your method's expectancy? If it isn't profitable in testing, don't trade it!

2. Clarity & Precision

Are you crystal clear about your method? Can you explain it, inside out, from memory? If you aren't clear about your method then how do you expect to trade it in the heat of the trading day?

Are you executing your method precisely? If not why not?

3. Intention

Do you hold a clear intention of success before and during the trading session or do you just let things happen?

4. Focus

Are you able to maintain a detached focus or do you lose yourself in the charts? In the zone or zoned out? Successful trading requires healthy detachment from any individual trade.

5. Risk Tolerance

Do you have a healthy risk aversion? Do you get out at the slightest retracement or hold on way past the appropriate stop level?

6. The Ghost Whisperer

Are you haunted by past failures or losses or have your learned to clear your emotions?

7. Excitement level

How is your excitement level during the trading session? Cool as a cucumber or hyper over-trader? Look at your diet. Learn how to relax.

8. Fail safe

What fail safes do you have in place in case you lose control and start over trading or chasing losses? Do you have a maximum daily loss limit hardwired into your account with your broker?

9. Taking Responsibility

When you have a bad day or string of losses, do you face them, analyze them, stare them in the face until you really understand what happened or do you avoid them, do something else to take your mind off them until you forget them?

10. Willingness to Journal and Deconstruct Every Day

Do you keep a trading journal or do you feel an aversion to it? That aversion, like avoiding looking at your losses, is a sign of an emotional blockage that is preventing you from improving your trading. Clear it! Learning to clear your emotions is going to be one of the most valuable skills you can learn for your trading and your life!

And one more bonus point! Do you make your trading profits real? Take some money out of your account and spend it so that it doesn't stay money on paper - buy yourself something extravagant you don't really need.
About the Author
Mo Christiensen is one of the editors of the successful tradingadviceblog.com. The site specializes in high quality trading advice and profitable trading systems for new and struggling traders. See the original article in context at http://tradingadviceblog.com/trading_methods/10-ways-to-deconstruct-your-trading-and-build-a-better-plan
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