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You Cant Succeed Unless You Do Your Homework

I have found few traders who are consistent and conscientious about doing their market homework. All too often they slip into the abyss of laziness in the hope that they have somehow internalized their system rules. But the fact is that they expect to show a profit without having to work for it. There can be no success with a system unless you follow the system. And you can't follow the system unless you perform the necessary daily calculations or procedures.

It never ceases to amaze me how few traders consistently do their market homework. Even though they have developed good market indicators and effective trading techniques, they fail to consistently keep up-to-date on the markets and allow a good methodology to turn into a bad one by virtue of their laziness. This makes no sense to me whatsoever. The fact is that if you develop something that works, and if it is making money for you or facilitating your ability to make money, then by all means you ought to continue with it. Too many traders become complacent about their market studies, fail to do their homework, and then wonder why they lose money. If you intend to succeed, then you must do your homework no matter how simple or complex it may be.

Perhaps you have developed a trading system that requires nc homework. This is certainly possible. A number of the techniques described in this book do not require homework. However, you will still need to work on your trading diary, and you will still need to keep in close touch with trading opportunities that may develop during the next trading day. The only way to do this is tc study the markets. This is what I mean by homework, and this is why it must be done.

Keep Close Track of Your Results

Some traders refuse to monitor their trading results as a form oi defense against being distressed by bad results. This is neurotic behavior, and you should not engage in it. It will cost you money Know where you stand and keep in touch with your results always comparing them to what your systems should ideally b( generating. Always keep close track of your results on a trade-by-trade and day-by-day basis. If you know how your systems arc performing, you will have effective and valuable feedback abou the techniques you're using.

Unless you know your trading results, you will not have sufficient information about how well or how poorly your methods art performing. I suggest you use one of the many computerizec accounting programs to keep track of your results, or at the verj minimum, a spreadsheet that is updated manually will certainl} do the job. Pay especially close attention to your average winning trade and your average losing trade. Your average winners shoulc be consistently larger than your average losers. If they are not, then you are risking too much and getting too little for your efforts. This is an indication that change is necessary.

Another good reason for keeping track of all your trades and their results is to determine if and when your trading technique, system, or indicators have deteriorated and are in need of change or review. Unless you check your performance, you will not be cognizant that change is necessary, other than perhaps a vague feeling that all is not going well.