Eliminating your mistakes, one by one

When you lose a trade, you have to ask yourself if you entered correctly and it just went against you or if it was an emotional or careless entry. Traders who can otherwise read price action well will still be unprofitable because they do not have the discipline to enter only on good setups.

Your first task as a trader is to assess your winning percentages over a fixed timeframe, say a week. Is your winning percentage under 50%? In that case, maybe your current trading style is unsuitable to your personality. Are you trading breakouts and you panic when it moves against you? Maybe you are better off buying pullbacks. Are you trading counter-trend all the time? Perhaps a switch to with-trend trading may improve your score. Your first goal is to find a system where you are right at least 50% of the time on most days.

The next task is to assess every losing trade at the end of every day and update a chart as shown above. List your common mistakes and how many times you committed them per day. There are two categories of mistakes. Ones that you commit on most days and ones that you commit rarely except on certain days when you make a lot of them. Some are both.

For example, in the chart above, trading BW/ol is a mistake that is committed almost everyday but also especially on certain price action (Thursday in the example). Buying the wrong signal bar triggered only on two days, but on Wednesday it triggered 3 times. Mistakes that you commit on most days is the most important to fix. Pick the one that has caused you the highest losses and work on it consciously every trading day until you make it not more than twice a week. Then move to the next one.

Mistakes that you commit on specific kinds of days are easier to fix. You just need to recognize the kind of day that triggers an avalanche of mistakes. Are you shorting your way to the top on a Spike and channel day? Once you see the channel stop trading or only take with-channel trades. Put a post-it note on your monitor that warns: "Watch for channel!" if you must. Are you buying every bull breakout in a strong bear? Fade the breakout instead.

A genuine setup that you would take otherwise that just happened to go against you is not a mistake. That's part of trading. But you should keep track of this separately. This information allows you to select setups that are best for you and you should choose only the top 2 in the beginning and add others slowly as your trading improves.