I received a great question this week from a follower that was doing a review of their 2011 work – and had noted an area that they wanted to focus on more for 2012: Improving their trade entry by looking for higher probability trades.
What a great idea I thought, we should all have this as a goal each year for our trading. So how do you go about doing this? What can be done to improve the probability of success in your trade performance?
My first suggestion was to take a very simple approach: since they had already determined that the probability of success was an issue too often, take the Top 20 worst trades – dissect them and focus on what led to their poor performance and use that as a guide for future setups.
Is it a Moving Average support bounce plays? Did you wait for confirmation or try to be anticipatory?
Is there a Trend Line in the vicinity? Has it held before? Time since last test?
Where are the various Support and Resistance targets?
Do you know the stock well fundamentally or is it just a technical chart call?
I am sure you can come up with many other questions in a review but certainly this process should lead to better entries in the future. And oh, don’t forget about improving Patience – that will be on everyone’s list.