It happens to everyone…especially on a day like this…where stocks are enjoying an extended rally.
I’m sure this has happened to you as well…
Right after you close out a position… it starts to move more in your favor… but you’re no longer in. You start calculating what your profits would have been if you simply just held longer…
Stop.
You can drive yourself crazy, thinking about what could have or should have been.
Heck, on Friday, I sold out of my ROKU calls (some for gains of more than 100% – I alerted members when I bought and sold it).
However, the stock is up more than 20% this morning, after the company announced strong data pertaining to its active accounts. The firm estimates that 4Q active accounts will top 27M, and streaming hours are up by 68%.
Of course, if I had just held for an extra day, my profits would have been even larger. However, there’s a time and place for greed… but this isn’t one of them.
That said, I’ve created a checklist for you, which will help you get in the right trading mindset. You see, while most services preach to you strategies (yes, they are important, and yes, I can make money in down markets as well as up)… It’s the mental game that will set you apart from the rest.
Hacks to Improve Trading Performance
If you want to trade like the pros, you have to think like the pros.
You see, there are a few hacks to enhance your mental game including:
- Getting comfortable with trading stocks or options
- Look at risk-reward ratios
- Trading with a plan
- Journaling your trades
Getting Comfortable trading stocks or options
I know how daunting options or stock trading could be…
If you trade with fear and are uncomfortable, it’s most likely going to affect your trading performance.
For example, let’s say you have a hard time holding onto winners…start by trading smaller. You could trade 1 options contract or a few shares just to get comfortable.
Once you get comfortable trading and holding onto your winners, while minimizing risk…then you can up your position size.
Now, you can have a set position size. For example, Nathan Bear, who is a mentor in Millionaire Roadmaps and turned $37K into $1M+, is trading with clearly defined positions sizes. Consequently, that should help his mental game.
Nathan Bear with the mic – with Jason Bond on the right and T.O. on his far left. After turning a $37k account into over $1M, Nathan was awarded a brand new Porsche for his efforts.
Moving on, looking at risk-reward ratios helps with your mental game.
Look at risk-reward ratios
There are over 250 trading days in the year, and one day shouldn’t break you. However, if you’re lucky one day…it could make you. But that’s not the name of the game…Ultimately, you want longevity and consistency.
For example, I look to multiply my money. That means I’m not even looking to take profits unless I double my money. However, I keep my risk levels to a minimum.
You see, if you risk $1 to make $2, or more. Then you really only need to be right half the time just to break even…and if you’re right 70% of the time, well…that could be life changing money.
That said, find a risk-reward ratio that fits your risk profile. Maybe you’re more comfortable scalping and consistently taking smaller profits…or maybe you’re comfortable holding onto trades and looking for a 1-3 risk-reward ratio.
Now, one of the best things you can do to help your trading is planning your trade.
Trading with a Plan
Plan your trade and execute.
When you have a clear mindset of how you want to trade a specific stock or option, it becomes a lot easier.
Your trading plan should include:
- Your thesis or edge.What’s your thought process on the trade? Do you think the stock is going to catch a bid or sell off due to a technical indicator? Are you trading an A+ setup that has consistently proven to be profitable?
- Buy, stop-loss, and target areas. Where are you looking to buy the stock, as well as stop out if it doesn’t work out, and take profits if it does work out?
Now, keep in mind, your trading plan could be more detailed than this…but it’s a good starting point.
Here’s a look at an example trading plan for my ROKU and Constellation Brands (STZ) trade.
Once you have your trading plan…it makes the next hack to improve your trading performance a lot easier.
Journaling Your Trades
How do you know whether you’re trading well or poorly if you don’t keep a log of your trades?
You wouldn’t unless you have a photographic memory…
At the end of each trading day, try to review your trades to see whether you followed your plan and stuck to it.
You see, some trading plans could include a good thesis, but poor execution. While some trading plans could be terrible, but you might make money on it. That said, this good give you a false perception of your trading performance.
You’re probably wondering, “Well how do I journal my trades?”
It’s simple, at the end of each trading day keep these bullet points in mind:
- Date your journals and write down the ticker, as well as where you bought, stopped out, or sold. The same goes for if you short stock or write options.
- Write out a clear and concise thesis (This should be easy because you should write out a plan before you get into a trade). Why did you buy or short the stock? Was your idea based on a technical pattern, fundamentals, or catalysts?
- Did the trade work out?
- How did you sleep the night before? What’s your diet like? Do you exercise every day?
Ultimately, this allows you to see a pattern with your trades. You can see what trades work, and focus on those…while cutting the underperforming strategies.
Look, you are never going to consistently exit at the top or buy at the bottom. However, if you stick to these best practices, you’ll most likely see improvements in your results.
Until these markets show me a trend, I’ll continue to move in and out, taking profits when I get them. If you want to find out about my weapon of choice, click here.