Post-trading is an important time that can significantly impact your long-term trading performance. It means that trading does not end when you close a position.
It's common to think of trading only as the process of opening and then closing a position. Why would you want to look back at any painful loss when you can enjoy the good feeling from the great trades you did that day?
However, professional traders constantly review their trades, whether they result in a profit or a loss. They know that by looking back, they will discover things they did not notice during the day. Looking at the charts after a trade and being objective is a never-ending process for improving performance. Professional traders are always looking for ways to improve their trading.
Steps to review a trade
Step 1. Note the entry and settlement points on the chart
On the price chart, note the candlestick where you made your entries and exits. By doing this, you can see at a glance whether you have traded according to your plan. In particular, it's easier to know whether you have followed the entry rules. You can often reduce losses by improving your entry points.
Step 2. Analyse the strategy
Analyse the strategy against the trading plan to see whether executed it as planned. The key here is to identify why you made a profit and why you made a loss. Knowing the reasons and causes will enable you to improve in future.
Understanding why the market moved is also a necessary skill for traders. Prices always move for a reason and knowing why allows traders to adjust their strategy. Understand whether it was just a temporary increase in volatility or a major news event that turned the trend around.
Step 3. Establish the appropriate level of risk
Did each trade have a target profit and stop-loss setting appropriate for the particular strategy? If the profit target was too large, the price reversed before it could hit the target, and instead, the stop-loss was hit first. Conversely, was the target too small? In that case, the risk-reward ratio was too high, making it impossible to recover losing trades with winning trades.
If the stop-loss is too large, it can lead to significant losses, while if it is too small, it can build up losses that should have been avoided. If the position size is too large, there's more risk of a substantial loss; if it is too small, it will take too long to build into a profit.
Step 4. Maintain mental control
First, check if you could calmly watch the live charts during trading. If you were trading with fatigue, anxiety or stress, you would not have been able to make favourable trading decisions. Remember, trading and mental control are closely related and essential to monitor, so you can always trade in a calm state.