I’d like to share an email provided by a YTC-newsletter reader, Alex, in response to the recent article on post-session analysis. In this email, Alex presents a method he used to improve his trading through effective post-session analysis and review. All effective review involves (in my opinion) some form of comparison of actual performance with hindsight performance. Alex offers a great technique for achieving this aim.
Thanks Alex… Great stuff.
I would like to share an element of post-session analysis which I came up with by accident (many good things happen that way, e.g. 3M sticky notes 😉
I am usually printing out unmarked candlestick charts at the end of the day, cover them with a blank sheet, and uncover bar by bar, marking my analysis and entries. I would then mark my trade management decisions too (moving SL and taking (partial) exits or making add-ons to the position. One day I printed, by mistake, 3 copies of the same chart. I used one for the analysis on that day; the other two copies were left on the table. A few days later, I printed "fresh" (then current) charts out and put them on the table on top of those extra "leftover" copies from a few days earlier.
I then started doing my bar-by-bar analysis, and at the end of it thought that some charts looked familiar. It was then that I realized that there were some old charts in that batch. Out of curiosity, I compared freshly marked chart with my analysis of the same chart which I made a few days earlier. I was surprised to see that only a half of the setups on both charts were "overlapping" (i.e. were marked in the same way). That made me think.
I started doing that as a deliberate exercise: print out 2-3 copies of a chart, do analysis on that day and keep the other copies for a few days, then analyze them again. Gradually, I realized that I can consistently mark certain types of setups. I decided to focus more on those setups as the ones I could recognize better. Gradually, I increased consistency of my analysis to about 70%. During that exercise, the most consistent setups were distilled and my trading is now centered around them.
With that trick my thought was (still is) – if I cannot achieve at least 70-75% consistency with identifying setups during a bar-by-bar analysis on a printed chart, how can I get it right with all the pressure of live trading.
Another trick to share: I grab a snapshot of each setup live (I use http://www.techsmith.com/jing/) to be able to review it at a "face value" – when you review trades post factum seeing how things indeed developed, it’s hard not to allow the "hindsight bias" to cloud your analysis. i.e. sometimes a setup looks bad with a hindsight, but makes perfect sense when taken – even great setups do fail from time to time.