Sunday, November 08, 2020

Grading Your Trading

At SMB Capital, the first week of every month includes team meetings, where traders share with the group their performance statistics, their progress on the goals they had set for the month, and their goals and plans going forward.  Reviewing the good, bad, and ugly about your trading in front of your peers is a great way of staying accountable, and it's also a powerful practice that enables every trader to learn from the experience of their teammates.  You don't need to belong to a trading firm or a team in order to benefit from this dynamic.  All you need is one or two partners that you meet online that trade similar markets and strategies to you and that show a similar dedication to learning and performance.  (A listing of trading communities and mentoring resources appears in the Appendix to my free blog book and can provide an excellent place to start in identifying potential trading partners.)

When risk manager Carlton Bryan kicks off the team meetings at SMB, what's the first thing he asks of each trader?  He asks them to give themselves a grade for the recent month's trading and then explain why they gave themselves that grade.

Why is it helpful to grade our trading?

Most of us who participate in financial markets are achievement oriented.  We seek mastery and success, as in any sport or competitive game.  When we publicly give ourselves a grade for our trading, we engage that competitive instinct.  Once we have a grade, we want to improve upon that grade, and once we get good grades in one area of trading, we look to master another.  Over time, the sequence of our grades provides a different kind of P/L:  a learning P/L.  Indeed, if we can focus on steadily improving our learning P/L, we create a powerful path toward a consistently profitable financial P/L.

Giving yourself a grade makes you face yourself:  your successes and your shortcomings.  Sharing that grade with others can create a teamwork where everyone helps everyone else improve their grades.

One trader I work with grades his trading every single day and sends that report card to me daily!  It's no surprise that he is profitable month after month, year after year.  Good traders look to improve when they fall short.  Great traders look to improve when they do well.  They learn from successes and continually find new areas to master.

Can we truly expect to improve if we don't actively keep score?


Further Resources: