Trading / Investing

Establishing Your Trading Baseline (like a Pro)

4 Min Read

When I sent out The Market Blueprint on Sunday evening, I already knew what the chain of actions would be for most people:

  1. Read the introduction
  2. Look at the pretty charts
  3. Open the trades

Was this the right course of action to take?If it leads to you making a profit, you might answer “yes” and see it as a good decision. But will this course of action really benefit your trading in the long term?The answer to that question is a resounding NO.Since trading is all about profit and loss, we often have the tendency to focus on the end results and forget everything else.That means, when someone presents us with an opportunity and it sounds realistic - we’ll take it.When I first started making money consistently from trading, I was completely focused on the end results. I was making more from my part-time trading than I was from my salary, working in banking.I was entirely focused on the superficial aspects of what I was doing. I knew if I hit certain percentages, I could buy a new car, get myself a flashy apartment and live a life of luxury.But I was going about it all the wrong way.[caption id="attachment_4303" align="aligncenter" width="317"]

NP on catwalk for Terence Trout

Here’s naïve 21 year old Nicholas, entirely focused on his superficial needs, walking the catwalk for Terence Trout Suits during London Fashion Week.[/caption]I kept having people ask me how I was actually achieving these returns. I couldn’t really answer them, because I didn’t know precisely what I was doing differently to everyone else.At the time, it didn’t matter to me. After all, the aim of the game is to make money - so who cares if I can’t explain myself, right?It wasn’t until I embarked on the journey of building an automated system that it really struck me how naïve I had been. If I don’t know what I’m doing, how can I put my strategy into an automated system? And furthermore, how on Earth could I make adjustments to make sure I continue being profitable?The answer was: I couldn’t.I needed to somehow figure out what I was doing; what were the fixed requirements of my strategy and what were the variables that I could adjust when necessary?This is when I realised: the most important aspect is not the end result, but the process and models that get you there.So if you jumped ahead and opened trades based on The Market Blueprint, you failed the test… naughty, naughty! *Smacks wrists* don’t do it again!The document I sent was supposed to show you the thought process and tools for establishing opportunities like that, which you could use to enhance your own development.So let’s take a step back and have a look at how you could have used this to your advantage.In my next email I’ll explain to you how you can track and test your trading strategy. I’ll show you how you can make it easier to adopt the good aspects and drop the bad ones – and how you could have used The Market Blueprint to become an even more awesome trader.But before any testing can take place, you first need to establish a baseline to understand where you’re starting from.“But Niki, how can I establish a baseline if I have no idea what I’m actually doing?”Don’t worry, we can make things simple. Some form of tracking is better than no tracking. After all, a good plan you can follow is better than a perfect plan that you ignore.So for the next few days I want you to keep a journal of your trades. Don’t worry about getting it perfect, just follow my points below and you’ll be fine.It doesn’t even need to be tidy, it can be on a few scraps of paper if necessary, and I want you to take note of the following points:

  • What trades did I open and what did I expect to happen?
  • How did the trades actually perform?
  • What was my thought process before I opened the trades (what objects or indicators were on my chart, what time-frames or assets did I look at, did I take anyone else’s analysis)?
  • How did I feel before opening the trade, during the trade and after closing the trade?
  • Did I follow a set system, or did I ‘wing’ it?