More on monitoring mistakes
Keep track of your R-multiples on every trade. If your initial risk was $200 and you make $600, then you have a 3R winner. If your initial risk was $200 and you have a $400 loss then you have a 2R loser.
Now a "mistake" is not following your trading rules.
SO here are some examples.
1) You take a trade that's not part of your trading rules - you trade it just on a whim. You lose $200 on it on a $200 risk. That's a 1R mistake.
2) You take a trade and you don't keep your stop. Let's say your stop was to get out of the trade if it fell 10% and let's say that your initial risk was $200.
The stock falls 50% and you lose $1000 before you get out. Your mistake cost you 5R.
Now does that make sense?
However, if you don't have a set of written trading rules to totally guide your behavior and trading, then you shouldn't be trading and everything you do is a mistake.
Comments
Having trading rules appears to be the point - and a good one.
Counting bases or Rs is mental score keeping - but it would seem that keeping a trading journal would allow finer tuning.
Posted by: allan | September 7, 2006 03:00 PM
Mistakes with positive outcome should be counted too.
Posted by: Serge | September 7, 2006 03:30 PM
But what if you have a winner, shouldn't you avarege it out the winners and losers
Posted by: Fernando | September 7, 2006 04:07 PM