As a way to keep learning, traders should do what I call a “trade autopsy” on their trades. This means carefully taking apart and evaluating both successful and unsuccessful trades. When I first started trading, this kind of weekly or monthly trade review was a great way for me to learn, and it really helped me “hone” my trading skills.
The most important thing is to ask yourself a series of questions about each trade after it’s over. You can use these questions to make a simple checklist or add them to the end of your trading plan. Just make sure you do the trade “autopsy” because it will help you develop a good trading routine and shorten the time it takes to learn how to trade.
The most important questions to ask in your trade autopsy are.
Some of the questions below will only make sense if you win, and some will only make sense if you lose. You can add to this list if you want, but don’t go overboard. Just ask the basic questions I’ve listed below for your trade autopsy.
We need to ask ourselves the following things about trade setup and entry:
How could I have kept that from happening?
If you had a loss, you’ll need to figure out if it was because you overtraded, traded when you knew you shouldn’t have, or didn’t stick to your trading plan, or if it was just a normal statistical loss that you couldn’t avoid (even if you’re trading right, you’ll still have some losses). This is an important question to ask, because if you’re losing because you’re trading too much, it’s a big problem that you need to fix as soon as possible if you don’t want to blow out your trading account.
Why did this sign work so well?
You can ask this question about a trade that wins or loses (losing trades can and should be good setups if you stick to your trading strategy and don’t overtrade). If it was an obvious trade setup, describe how it looked and make a quick note about the market conditions. For example, “long-tailed bullish pin bar buy signal from support in the up-trending market, pin bar tail was protruding down through support, making an obvious false break of the level.”
What did the winners and losers have in common and what didn’t they have?
What did the trade bring together? Was it going against both a key level and a moving average? It could have been at 50% and a key chart level. This is where you tell what kind of chart confluence the trade had or if it didn’t have any. Answer this question for both the winners and the losers so you can see if there are any patterns in their differences.
- What did each trade have that the others didn’t, and what didn’t it have?
- Were there any other things you can think of that might have made a difference in whether a trade won or lost?
- What went wrong and what went right after the trade was made that helped it turn out well?
If you saw something after you made the trade that made you feel even better about it, talk about it here. This could be another signal related to the trade, maybe on a different time frame or a recent breakout from a level, etc.
We need to ask ourselves the following about trade management:
Most of the time, traders mess up when it comes to trade management. Most of the time, traders make mistakes with trade management because they try to do too much and get too involved. In general, your long-term results will be better if you don’t micromanage your trades. When you do your trade autopsy, here are some questions to ask yourself about trade management:
What would have happened if I hadn’t gotten out of the trade early when I had a small loss or gain?
In a recent article, I talked about something I call “trading account death by a thousand cuts.” This is when you lose money or blow out your trading account by taking a lot of small losses. Small losses are usually better than big ones, but the best way to take a loss is to just accept your pre-determined 1R risk amount and place your stop loss logically according to the market structure. Then, let the trade play out, give it the space it needs to breathe, and either you’ll take the loss you decided you were OK with or you’ll make a profit. If you always take losses before your stop loss gets hit, you don’t give your trading edge (strategy) the time and space it needs to play out and work in your favor.
What would have happened if I had left the trade open instead of closing it right before the profit target…
would I have lost or won in the end?
This one is pretty easy to understand. It’s a good question to ask to see how well your trades would have gone if you had just “set and forget” them (usually it works quite well).
What would have happened if my stop loss was just a little bit wider? Would it have made a difference?
Having your stop loss a little farther away from where you want it to be can sometimes make the difference between a win and a loss. Check out my article on trade entry tricks to learn more about how to place your stop loss better.
What would have happened if my risk-reward ratio was lower, say 2R instead of 3R… Would that have made it worth it to trade?
Sometimes, it’s better to take a smaller reward or one that makes more sense. We should always try to get a reward that is at least close to 2R, but I find that traders often have unrealistic expectations about how much they can make on a trade.
How did you feel while the trade was going on? Were you sleeping good?
This question is very important, and you should answer it truthfully (as you should all the other questions here of course). But it’s very important to check in with yourself while you’re trading. It’s normal to check your trade two or three times a day, but you have a problem if, when you’re at your desk at work, all you can think about is your trade and how it’s doing. You have a problem if you can’t sleep because you can’t stop thinking about your trade and you’re always checking your trading app on your phone. Most of the time, this kind of obsession with a trade comes from trying too hard to make money. For example, you might be risking too much on each trade, or you might be trading too much and trying to “force” your trading account to make money.
Don’t spend too much time asking yourself “what if?” questions. Instead, focus on the basics and make sure you’re learning something and paying attention to what you find out.
There is no perfect system or way to do this. What’s important is that you look at your own behavior as well as the trade setups and charts. Doing these “trade autopsies” over time should help you learn more about your trading strategy and how you should act on the market to get the best trading results.
“If you don't find a way to make money while you sleep, you will work until you die.”
- Warren Buffett
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