Friday, September 17, 2010

Perfect Trade ??

Trader Quest ~ What is a perfect trade?

Plot Course Set up some simple guidelines to determine for yourself what constitutes perfect. One set of guidelines used recently with a trader amounted to the following statement, "A perfect trade is a controlled entry and a controlled exit." Another definition frequently used is, "I followed my strategy’s written entry and exit rules." What ever the definition that you come to use, make sure it’s defined enough so that you can fairly and consistently rate your trades.

Ride Wave ~ To put this into practice requires a definition as stated above, and also that you perform this review post trade. So for example, you made 15 trades today in the mini S&P. 10 trades you defined as perfect since you entered them per plan and were either stopped out or reached your positive target. The remaining 5 trades you did not count as perfect, and here comes a variety of reasons:

"I anticipated...I waited...I got out early, etc." 

Initially, it’s ok just to do the tally and score yourself 10 out of 15. The deliberative practice that will elevate your trading will be to begin to notice patterns in the non-perfect trades and analyze deeper into the conditions, emotions or biases that may have steered you away from the defined perfect trade. As coaches we strive for 80% perfect once the definition is set and 90% shortly thereafter. 100% means that you are an algo.

Keep Curious, Coach Mark

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