Why do I do monthly review, and only monthly?

Posted on November 07th, 2007 in Trading Journal

I don’t have to write another post to tell you why do you need to keep a trading journal. I assume you should know if you are taking trading seriously. But, I guess, most of traders might have the same problem which I used to have, ‘over review’ your trading result.

No doubt, we have to review our trading result, or the accounting book of your business. Do not try to hide the losses and mistakes to yourself. After all, this is our own business, isn’t it? But just how frequent should we do that?

After trading for a little while, I figure out , doing a monthly review is pretty much enough for day trader, like myself. Why monthly and not weekly? Well, this is not a rule, but an observation. I used to do weekly review of my trading. It is useful. But, it does not really tell me my overall performance. In other words, weekly review is kinda ’short-sighted’. Why is it so? Let’s take a example, during the FOMC meeting week, market might be a little bit choppy, most likely traders are waiting for the interest rate decision. I might be trading extremely well during this kinda week, or I might be chopped to pieces. Does the result of the week itself tell me a little about my over performance as a trader? Nah, I don’t think so.

So, why do we spend time to analyse the result of the week, and feel ‘happy’ or even ‘devastated’ about it? And subsequently thinking about ‘maybe I should not trail my stops’, ‘maybe I should wait when the candle closes above yesterday’s high’ , blah, blah , blah. Maybe I should change the system rules! again?!? I don’t see a point. In fact, it is similar to trading. Do not trap yourself in the 5-minute charts and forget about hourly chart or even daily chart. Why? Over the long run, the big picture tells you more about the ‘truth’.

I would think a monthly, quaterly , and a yearly review of the overall trading performance are pretty adequate. Tracking monthly cost of trading, reviewing mistakes, analysing the system performance over difference weeks, or even seasons. That’s more effective, well, to me.

From the desk of Tradergav.com

Tags: Strategy & tools, Trading

Caravaggio

Interesting stuff Trader Gav. I've been posting weekly results because while I also believe that weekly numbers are close on meaningless, the behavioural aspect of trading requires closer, more frequent monitoring.

I settled on weekly reporting as a happy medium, but after reading your post, it is true that it doesn't really make sense. Better to report the month end figures, and keep a running tally of the behavioural assessment for each trade, perhaps calculating an average at the end of the month.

Thanks amigo.

Gav

Hey Caravaggio,
Nice to hear from you again. Though I agree monthly review might be a better for me, and maybe you as well, I still hope to see you post a little bit more frequent on your blog. :)

I am reading it regularly. Have a good day.

Chuck

Solid advice for any aspect of life. I really do feel that if you desire to improve any aspect of your life, you need to be tracking it. Trading journal, workout journal, writing goals and evaluating/updating are all important parts of a successful plans.

Chuck

Gav

Hey Dave, nice to hear from you.
I agree with you that we should review every trade to determine if we followed our rules.
But for overall performance, we need a little bit more inputs to construct the statistics. That's why I feel monthly review is pretty adequate for this purpose :-)

Dave

I certainly see what you mean, Gav. However, I look at a trading review in two ways. One is a aggregate review where you look at a large number of your trades to see if tweaking is required. I also think traders should review every trade they make to determine if they followed their rules or not.

Even if make money on a trade where you don't follow your rules, the trader should consciously classify that trade as a mistake.

I get what you're saying, though. Often times traders will get bogged down trying to come up with a reason for every losing trade. Any given trade could be a loser and some traders never quite come to grips with that.

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