Trader Performance Drills

Here’s another great email question from a reader…

Question:

Hello Mr. Beggs,

I am serious about trading, but I am still a newbie. What are three things that I can practice to improve my performance that can be repeated a lot and will continuously provide me feed back on my results? You currently being a successful trader and instructor/mentor, so I figure you must know a few things that are highly mentally demanding and maybe not fun but would improve a traders performance if practiced.

Thank you in advance for your help, I truly appreciate it!

W

Response:

Hi W,

Thanks for your email. Great question.

Highly mentally demanding activities which will improve a traders performance, if practiced…

It’s difficult without knowing exactly what stage of development you’re at, however the following are the first things that come to mind (noting that any of the following which involve actual trading are meant to be on a simulator / demo platform):

  1. Mike Reed from Tradestalker suggests an exercise which I really like. Here’s what he says about it… (NB. for emini S&P, so adjust sizes to suit your market)

    Practice exiting trades at break-even, using a one-tick target, a two or three tick soft stop (mental stop) and a 6 tick hard stop. Never allow the market to hit your hard stop. Exit by moving your target towards your hard stop, not by moving your hard stop towards your target. With time, all of this must become a reflex. You won’t always be able to keep your losses down to 2 ticks, but only on rare occasions should you find yourself letting the market hit your hard stop. (Rarely means only about once every 50-100 trades after you get the hang of it.)

    Although your entries won’t be good enough in the beginning to make a profit trading these tight soft stops, your entries will gradually improve until you turn the corner and become profitable.

    Learn exits and entries separately. Don’t let the one influence the other.

    Taking losses in this way takes dedication and discipline, so stick with it. It’s the key to confident trading. If you never take large losses (and rarely medium size ones), the fear of loss pretty much goes away, and your confidence grows. Especially after your entries improve enough to support a "scalping" type exit strategy.

    Source (if you want to read more): http://www.tradestalker.com/Steps-to-Professional-Day-Trading.htm

  2. Dr Brett Steenbarger has a blog post which includes three great exercises, one for practicing execution, one for position management and one for reading the market in real-time.

    I’ll link to this one rather than reproduce it: http://traderfeed.blogspot.com/2010/02/drills-to-improve-your-intraday-trading.html

  3. And one from me… just watch price. Don’t trade, just watch it at higher speed via a replay feature, and constantly assess where it’s going next?

Other useful exercises, although they won’t provide immediate feedback:

  1. Keep a market structure journal. Add to it daily. Refer to it daily for study. http://www.yourtradingcoach.com/products/ebooks/the-greatest-trading-book-ever.pdf

  2. Sim replay of "hindsight perfect" setup identification, trade entry and
    management. Over and over and over again. See this part 1 of the article: http://yourtradingcoach.com/trading-business/how-to-conduct-an-effective-trading-session-review-1-of-2/ (and the link to part 2 at the end of the first article)

Happy trading,

Lance Beggs


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