“The first effective feedback system is measurement. The things we measure are the things we improve. This holds true for the number of pages we read, the number of pushups we do, the number of sales calls we make, and any other task that is important to us. It is only through measurement that we have any proof of whether we are getting better or worse.”
There is an excellent article on the subject of Deliberate Practice at. https://jamesclear.com/beginners-guide-deliberate-practice
I’m a firm believer that if you want to improve something, start by measuring it. For traders this means journaling. Record each of your trades BEFORE you enter. Screenshot both the timeframe of the trade and high timeframes. Explain why you are entering the trade – list the pros and cons. Note your mental state. Then when the trade is complete add a screenshot of the finished trade. Note your win or loss amount. Note the maximum run up of the trader before you exited. A journal like this allows you to track your trades, measure your successes and your challenges, and begin to identify patterns to your trading style.
At the end of the week or month, input the data into a basic spreadsheet (total # of wins, total # of losses and values of each). This will give you the critical ability to see your Win Ratio, calculate your minimum Risk: Reward for every trade and develop an expectation for your trading. Remember: the most important equation to a trader is Minimum Win % = Risk ÷ (Risk + Reward) x 100. If you don’t journal for any other reason, journal to track your Win Ratio.
Journaling as Deliberate Practice
What you want to do through journaling is identify the basic elements of your trading in order to identify specific weaknesses rather than general failures. It’s all too easy to have a loss and say “I lost that trade”. The successful trader wants to know why they lost – and that requires analysis. As a personal example I found that was overall losing despite having successful trades every week. An analysis showed that I had a high percentage of trades where the trades went in the intended direction – from this I saw that my analysis was generally good. So why was I losing? Digging deeper into each trade (thanks to my journal!) revealed that I was reaching too far and trying to maximize my trade too much. Inevitably I was falling victim to pullbacks which would trigger my trailing stop and my profit was low despite a decent win ratio. Further analysis revealed that the majority of these trades surpassed the 2R mark and then the pullback would occur (this is why it’s so handy to track the Run Up of each trade). I could change my trading rules to modify my trailing stop to allow for the pullback but this compromised my trading plan in other areas. Instead I used my spreadsheet to calculate what would happen if I just took 100% profit at 2R on all those trades. The result? A whopping 17R increase over 100 trades. That’s 34% of my equity in profit I could have gained from modifying my strategy to take profit early! And what about the loss of the big winners? It wasn’t even close to being worth it – my trade journal & spreadsheet told me that too!
My example is great description of the process of Deliberate Practice: break the overall process down into parts, identify your weaknesses, test new strategies for each section, and then integrate your learning into the overall process.
Here are some classic examples from other disciplines to help illustrate the idea of Deliberate Practice:
Music: A pianist might break down a complex piece into individual sections, practice each hand separately, and work on difficult passages repeatedly with feedback from a teacher.
Sports: A tennis player might focus on their serve, breaking it down into the toss, swing, and follow-through, and practice each component individually before integrating them.
How does this translate to trading?
As I’ve already mentioned, journaling is your measurement process. To practice on your weaknesses you want the second core training tool for a trader: simulation. Simulation (also called paper trading) is the re-trading of your trades after they’ve occurred. Software like TradingView allows you to easily walk through history one bar at a time. Do this for your trades where you struggled and pretend you are trading them live. Notice what went wrong in your live trade and see what happens when you do things differently. Go slowly – this isn’t about realtime speed. This is your opportunity to meticulously work through tricky situations, to try different strategies and responses to the market action. This is how you learn to trade and how to avoid repeating past mistakes in the future.
Simulation is so much more valuable than spending time in front of live charts looking for that next trade. Successful traders have said 80% of trading is time spent in the past. Practice deliberately and you will succeed.