Most traders over time develop a routine before entering a trade. I use a checklist, called my Trade Ticket, to prevent any real disasters before entering any trade. For example, I calculate what kind of risk I want in each trade. I ask myself if I am chasing or being fearful, euphoric, or excessively fearful. That and a dozen or more criteria allow me to enter or exit a trade knowing I am performing at my best.
When running a trading business, a solid monitoring system includes regular reviews to maintain a highly profitable business. That system involves a series of questions at certain times throughout the year. While it only takes a few minutes to complete, it may save you a bundle.
DAILY
- If the market reverses today, how am I positioned for protection?
- Am I being aggressive enough to maximize profit?
- Can I add to my current positions or take some profits now?
- If my entry into this trade was yesterday’s close, would I still enter it now?
WEEKLY
- Am I flowing with the market or working against it?
- What did I do this week correctly and what can I do better next week?
- Am I diversified in my trade types, beta, option dates to expiration, sectors, and industries?
- Should I add to my current positions or take some profits this coming week?
- What trades do I need to add or remove from my option portfolio to maximize my return?
MONTHLY
- What did I do this month correctly and what can I do better next month?
- Am I using seasonality of sectors and industries to my advantage?
- Am I too dependent on any one sector or industry?
QUARTERLY
- What Sectors are leading and lagging this year?
- Am I on target for my annual goals?
- What did I do this quarter correctly and what can I do better next quarter?
By asking yourself some key questions throughout the year you can stay on top of your trading. The idea is to learn, grow, and go forward. That’s where the profits are waiting!
Enuf said.