Traders are always told to learn from each trade. The advice is typically formulated like this: soak in the information, comprehend the market movements, and remember the price action dynamicss… then try to apply the lessons in your future trading (see image below).
This advice is very sound and valid, but not quite complete. It is vital to understand WHEN you should apply the learning process and WHEN you should ignore it.
Here is simple rule of thumb when you need to learn from your trading decisions and mistakes VERSUS when you should be focused on other things like trading or hobbies.
2. AFTER TRADING DAY: this is the correct moment to learn, evaluate and embrace all of the improvement lessons from this day trading for better trading performance in the future.
3. NEXT TRADING DAY (before trading): rehearing the lessons learned from the previous trading day BEFORE you start is fine. This helps reinforce the lessons learned.
4. NEXT TRADING DAY (once trading starts): once the new trading day starts, do not think about yesterday’s bad decisions, unlucky situations or good moments. ONLY focus on the charts and present decisions.
5. END OF THE WEEK: this is the perfect moment to review all of the trading evaluations of each trading day.
Simple and clear: only learn in the AFTER trading hours and focus on trading DURING the trading hours.
Or in other words, REMEMBER the lessons to improve your trading but FORGET the annoyance and irritation when actually trading.
Traders need a good memory for recognizing market patterns and improving their game plan but we really need to work on forgetting all of the past trading mistakes and unlucky moments.
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