Learning from our mistakes

[deaddog]

I feel that in order to learn from our mistakes it is necessary to do the following;

1) Identify and define your mistake
2) Take responsibility for your actions
3) Analyse; Determine the WHY (what was the thought process)
4) Develop an action plan to keep you from repeating the mistake
5) Review.

It might be of value to other traders if we were to share some of the mistakes we made and what we learned from them.

The question I ask is "What aren't you doing now that you did when you started?"

 

[deaddog]

The question I ask is "What aren't you doing now that you did when you started?"

What I didn't have when I started was a written trading plan.

Why would you need a trading plan? The market is fluid, you have to adjust to what the market is doing, all you have to do is find or buy the secret then take the set-ups and rake in the profit. Every book or article I read had a section on planning but I skipped over that because it didn't apply to me.

I now have a plan that I can refer to. If I follow the plan to the letter and still consistently lose money then at least I know the fault lies with the plan, not with the trader.

For what ever reason it seems you will more than likely follow something that is written down.

 

[SimpleMeLike]

What I didn't have when I started was a written trading plan.

Why would you need a trading plan? The market is fluid, you have to adjust to what the market is doing, all you have to do is find or buy the secret then take the set-ups and rake in the profit. Every book or article I read had a section on planning but I skipped over that because it didn't apply to me.

I now have a plan that I can refer to. If I follow the plan to the letter and still consistently lose money then at least I know the fault lies with the plan, not with the trader.

For what ever reason it seems you will more than likely follow something that is written down.

Morning deaddog,

Good write up.

I respect what you are saying, and agree. However, I will add to make sure to test the plan for one year of market data or X, XXX amount of trades.

I got my butt whipped very good this summer and lost money trading crude oil, but in the spring I made money. I had to ditch that plan cause I kept getting stopped out. Market changed.

Creating a trading plan is easy, trusting the plan is harder.

 

[smallfil]

I feel that in order to learn from our mistakes it is necessary to do the following;

1) Identify and define your mistake
2) Take responsibility for your actions
3) Analyse; Determine the WHY (what was the thought process)
4) Develop an action plan to keep you from repeating the mistake
5) Review.

It might be of value to other traders if we were to share some of the mistakes we made and what we learned from them.

The question I ask is "What aren't you doing now that you did when you started?"

We are all human and make mistakes. My last recent mistake was not respecting my stop loss. Had I done so, I would have had lost $2,000 on my option trades instead, of $5,000. As bad as that was, I was still okay because it came from my profits. I had proper risk management and position sizing. Still, $3,000 is a good chunk of trades which could have paid for atleast, 5 options trades with huge potential for gains. Knowing my mistake, hopefully, avoids most of the mistakes which all cost monies out of your pocket. As Victor Sperandeo said in his book, if you get your trades right 80% of the time, you should be fine. That gives leeway for mistakes. You just move on to the next trade. Those next trades could be nice size winners to offset any losses you might have.

 

[tickmagnet]

I had 1000 shares of MELI back in 2008 , sold @ 14 , took 1k loss , was it a mistake?

 

[deaddog]

I had 1000 shares of MELI back in 2008 , sold @ 14 , took 1k loss , was it a mistake?

I don't have enough information to make that call.
If you followed your plan it might have been a good trade with a bad outcome.

 

[deaddog]

We are all human and make mistakes.

That's is a given. The question is did you learn anything of value from your mistakes?

 

[smallfil]

That's is a given. The question is did you learn anything of value from your mistakes?

Stick to your rules. Observe your stop loss points. That is worth $3,000 in a lesson. A $3,000 expensive lesson that should have been avoided. That is why you have a trading journal. Your goal is to try to be as closely efficient to 100% as to following your trading plan and rules. Losing $2,000 could not have been avoided because the market sold off heavily, decimating my call options. It did not matter as proper position sizing and risk management is in place. The only thing left is to execute the trading plan and not make any foolish mistakes like this one. Small losses can easily be made up, large losses are far harder to overcome.

 

[deaddog]

When you make what you consider to be a mistake, do you write it down so you can refer back to it.

I suggest you write down your mistake; then write out how you will avoid that mistake in the future.

Everybody will make mistakes. You want to avoid make the same mistake over and over.

 

[tickmagnet]

I don't have enough information to make that call.
If you followed your plan it might have been a good trade with a bad outcome.

It was 2008 , no plan worked, scary times.