Becoming Your Own Trading Mentor | How to Analyze Your Own Trades

Becoming Your Own Trading Mentor | How to Analyze Your Own Trades

 

This article on Becoming Your Own Trading Mentor is the opinion of Optimus Futures.

trading mentor

There is a real value to doubt–to not accepting the storehouse of knowledge that other people built before you. Should there be any flaws in its foundations–faulty and dilapidated–or should its interior be cluttered with junk, you will find yourself stuck, wasting time separating the good components from the bad; the useful from the useless stuff.

The upside is that you gain a certain degree of self-discovery leading to self-reliance and self-sufficiency. The downside is that you must build it all yourself with limited tools and resources at your disposal. But ultimately, it may be well worth the time and effort.

In the futures market, this boils down to a simple process: you have to become your own trading mentor in order to become a truly self-reliant trader. Teaching yourself–essentially, DIY trading education–is not an easy task, but it is the only task worth accomplishing, second to actually making money in the live markets.

What Many Beginning Traders Get Wrong About “Learning”

To become your own trading mentor, you first have to become a good learner. But it is this definition that most traders get all wrong. Sure, the word “learn” presents an explicitly affirmative idea: you absorb and accumulate knowledge. You gain something– a combination of knowledge, experience, and skills. You fill a void so to speak, meaning you satisfy a lack. It is a positive process.

The problem with this idea is evident in many beginning traders’ experiences. You accumulate so much knowledge that its excessive weight bears down on you too heavily, impeding your progress; unable to make it to the next step. You end up a confused mess, burdened by too many approaches, all of which may be incompatible in combination.

Here’s a micro-example:

Indicator Trend
50 EMA Up
200 EMA Down
RSI Up – 40 and rising
Fibonacci 32% retrace – Down
Volume Low (reversing)
Daily Trend Up
Weekly Trend Down
Monthly Trend Up

 

So, is it up or down?

If every indicator is not compatible, then on a larger scale, many approaches and strategies will likely be incompatible, making your job as a trader even more difficult when it comes to analyzing futures trades and markets. A plethora of knowledge, yet unable to act; paralysis by analysis.

The flip side of learning is that it is also a razor-sharp negative process. Learning what not to do is just as important as learning what to do. There are many ways to do something right, but only a handful of ways to screw things up.

“I know 101 ways to make money in the futures markets, but because I…

  • Took on too large a position…or
  • Didn’t check the economic calendar…or
  • Placed too much faith in my Bollinger Band reversal strategy…or
  • Went with the fundamentals without checking the technicals…(etc.)

“…I blew up my entire trading account.”

Doubt Everything and Build It All Back – The Hallmark of a Truly Self-Reliant Trader

When the French philosopher, Rene Descartes, came up with “cogito, ergo sum”–in other words, “I think, therefore I am,” he went through the same process. Religion? Let’s doubt it all. Philosophical theories? Dump ‘em. Ideas concerning my own ethics and values? Throw ‘em out the window. My own self-existence? Hold it…if I’m thinking about this, then I have to exist. Because if I were non-existent, it would be impossible for me to think. So, I must exist because I’m thinking. Cogito, ergo sum–I think (I’m a thinking being), therefore I am (I exist).

So, he started off with at least one certainty in the world: that he probably existed. But then, he had to build every other notion from the ground up. A self-reliant thinker.

To be your own trading mentor, you will have to do the same. All technical approaches? Highly doubtable. The charts I’m using? Maybe I’m using the wrong charts or wrong time frame. My trading platform? I should go over why I need all of those functionalities; those bells and whistles. My trading capital? Maybe I need more, or perhaps I should risk less. Goal to be among the top 1% of day traders making money? Perhaps I should consider the fact that traders among the top 1% are always changing, hence, it is a poor statistical representation of success. Maybe it’s about sustainability. Or, maybe I’m more of a swing trader than a day trader or vice versa.

Lots to doubt. Lots to test. Lots to rebuild.

Painful, I know. But necessary? Pretty much so.

Rethink Your Trading Routine

If you view everything trading-related through the lens of skepticism, you’ll question some of the most basic things, like your trading routine; your preparation thoughts, and habits. How do you know your routine is effective? How might you know if you’re not preparing enough, or if you’re over-preparing? These are real “meta” pain in the a*s questions, but it’s better to ask them now than deal with them while in the middle of a losing trade.

Are you scanning the markets properly to prepare for your trading day? Customize your scanning routine to meet your specific futures trading goals. In other words, trim the fat.

If you’re a day trader reacting to small-scale supply and demand actions (market noise), then as long as you’re aware of the larger market context (e.g. economic releases throughout the day), then you may not need to keep that distracting CNBC or Bloomberg news feed in the background. If you are a long-term position trader (or investor), then why pay attention to the day-to-day dance of volatility?

Do you have a trading checklist or scoresheet? Do you even need one (some traders don’t)?  When it comes to preparation, get the proverbial cart in place before you drive the horse.

Now, if you need a few routine tips to learn>doubt>test> and rebuild or customize, check out our primer on setting up an effective trading routine.

Don’t take our word for it. Remember, you are your own trading mentor. We provide source materials. You make something out of them. And whatever you make, be sure that it brings profitability to your endeavors.

Rethink Your Chart Patterns

There are at least 10 chart patterns that every trader should know. We have our own suggested ten. As a DIY trading mentor, will you take this suggestion at face value? What if they work for me but only three of them work for you? What if you find ten that are essential, but none of them are on this list? What if it’s not the patterns themselves but how you trade the patterns that make a difference–as in time frame, risk management strategy, market, etc.?

There’s also the likelihood that each pattern has multiple variants. For example, a double top can have an Adam + Adam, Adam + Eve, Eve + Eve, or Eve + Adam double top. A double top can occur at an all-time-highs, or it can take place at a relative “top” somewhere toward the middle of a bullish run from the bottom. Where does it work? What kind of techniques might work best given these variable conditions? This requires testing, tweaking, and personalization, wouldn’t you think?

Rethink Your Trading Template Setup?

It may sound obvious to say that there is more to trading than the actual trades themselves, yet many traders take for granted the “material support” backing their executions. For instance, why are you using a fixed chart? If the answer is that a modular chart adds little value to your trading, then perhaps you are right. But if you tell me that you did not even know what a modular chart is, then I’ll say that you’re missing something. Is it a big deal? Well, it depends on your trading style. It can be. Or maybe it is not. But you should know about it.

How many different time frames are you looking at? One, two, three? How might you know if you are not seeing enough, or perhaps seeing too much? If you are viewing multiple timeframes, or multiple markets, perhaps you need more than one monitor or just one monitor with a larger screen size

All the above pertains to screen setups. Your screen is what allows you to view markets and analyze futures trades. It’s your trading template. Not seeing efficiently enough can hurt you. So can seeing too much. Here are 10 tips to consider when building your trading template. Again, do not take our word for it. Be skeptical and test it yourself. Maybe it will be sufficient, and maybe not. Either way, once you have completed your DIY testing, you’ll be much more confident about your setup.

See Your Trades to Completion

A trader many years ago opened a $1 million account. He was a hot-shot CTA, as in, he was able to get decent levels of assets under management–making him a good salesman (not sure about his trading though).

Impatient and eager to profit from an ECB report, he jumped into a humongous FX position trading the EUR/USD. The problem was, once he entered his position, he realized that he had learned everything about the platform except how to close out his position. He started the proverbial fight but didn’t know how to finish it. Imagine how smart you will sound explaining that to clients. It is like telling a traffic cop you knew only how to step on the gas but not the breaks.

Skillful market exits are just as important as entries. You may not want to do a full exit, closing out only a portion of your position. You may have different conditionals–exit here, but under new conditions, exit higher (or lower). Trail a stop here, manually or using automation. Not all exits are the same.

As we explain in another article on exits, closing out can be mechanical, emotional, or a combination of both. In short, it’s conditional. But are those conditions sound? Might you be “going against the system,” and is that wrong? Or, should you have gone against the system because the conditions rendered the system irrelevant? Unlike the trader in our example, it really helps not to screw things up by knowing how to “finish the job.” But if you want to do it successfully, you must finish it right.

The Bottom Line

All of the “meta-questions” we presented may seem overly reflective. But they have barely scratched the surface, at least for anyone who’s serious about learning how to trade in a self-sufficient manner. If you are going to teach yourself how to trade, you’re responsible for the full spectrum of knowledge to be gained and knowledge to be rejected. If you can make it work (and perhaps you can), how rewarding it is to be a self-made trader rather than a half-knowing follower who happens to be lucky, at least for the moment.

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

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