I have been thinking of grading my trades and execution. There are indeed some bloggers grading their trades. Trader-x grading his trade setup with alphabets (A, A+…etc), J.C from NYSE scalper’s tales grading his daily trades as well:
I’m going to re-define what I consider a good trade and a bad trade. Since I’m not doing 8000 and 10,000 share positions as often any more, I’ll consider a good trade anything that makes $150 or more and a bad trade anything that loses $100 or more.
I find it to be useful by grading my trades and trade execution. It gives me an insight of my trading performance from another aspect in addition to expectancy and accuracy.
Here is my grading plan. This is to be done separately on each type of trade setup. Basically, I am applying the ideas introduced by John Carter in Mastering the trade.
- 1: Target hit
- 2: Out at a differrent price from target, but profitable (time stop)
- 3: Out at even (scratch, time stop)
- 4: Out at a different price from stop, but a losing trade
- 5: Stop hit
The following scale is to grade how well I actually executed the trade:
- 1: Followed trade as dictated in my plan
- 2: Followed trade entry, but closed out position before predetermined target was hit
- 3: Followed trade entry, but removed stop and let position run past original target
- 4: Entered setup late and didn’t set target
- 5: Impulse trade
Add up daily scores and divide by the total number of trades to get an average for both categories. This will keep a grade point average of the number of trades you made that are profitable and those that are executed as originally planned. Track by trading method used, so you are able to rate each method and tweak as needed. Review the score at end of each month to see what needs to be modified.
I am particularly interested in looking at the second category which is a psychological challege. It is easy to have some buy/sell signals, but, to follow the plan, trust myself, trust my plan and methodology and reduce number of impulsive trades are challeges traders face everyday. I have the tendency to exit a trade prematurely, This grading plan will always warn me to “behave myself”.
This is just another way to improve my trading.