A Process Framework for Reviewing 2014 Trading Performance

Ah, yes:  more wisdom from those purveyors of Despair!  A positive attitude may be necessary if we're to learn from experience, but it's not sufficient.  Change only happens when we turn observations into goals and goals into corrective actions.

As we get to year's end, I find a look back on the year's trading to be very helpful in identifying goals for the coming year.  One way of accomplishing that is to break trading down into component processes and map out what you've done well in each area and what you need to improve.  Goals can be all about extending strengths and becoming more consistent with what you do well as well as shoring up weaknesses and correcting mistakes.

So here's a starting point for a report card for your year's trading.  Give yourself an A, B, C, D, or F grade in each category, followed by a strength or weakness-related goal for each:

• INFORMATION COLLECTION - Consistently gathering useful information that is relevant to your trading
• IDEA GENERATION - Engaging in creative thought to turn information into unique and promising ideas
• TRADE STRUCTURING - Expressing ideas as trades that possess promising risk/reward
• EXECUTION - Entering trades at levels that provide promising risk/reward; exiting trades at planned targets
• POSITION/RISK MANAGEMENT - Sizing positions appropriately for risk control and targeted reward; using hedging and scaling in and out of positions to dynamically manage risk/reward
• PORTFOLIO MANAGEMENT - Assembling ideas and trades into a coherent whole where each trade provides potential unique returns; monitoring correlations and managing risk and reward effectively across the portfolio
• SELF-MANAGEMENT - Keeping yourself in optimal mental, physical, emotional, and spiritual condition to make sound decisions and sustain a high energy level

Your own trading may include fewer or more categories; these are ones I find particularly relevant across traders.  The idea is to approach your trading the way a physician approaches diagnosis:  assessing the health of every facet of your functioning.  By turning your performance review into a process review, you are more likely to pinpoint areas of work that can make a meaningful difference to the bottom line in 2015.

Further Reading:  Goal-Setting and Performance
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