Conducting an end-of-year review is crucial in your journey to develop as a trader. It's a moment to assess your achievements throughout the year and strategize for the upcoming year. Here's a detailed guide on how to conduct a review of your trading activities and plan improvements for the next year.
Why End-of-Year Review is Important?
- Measuring Your Trading Performance
- End-of-year review helps you:
- Measure Profits and Losses: Evaluate how much profit you've gained and compare it against your losses.
- Assess Trading Plan Effectiveness: Determine if you've followed your established trading plan and how effective it was.
- Applying Management Principles
- In management science, four main functions apply to trading:
- Planning: Setting trading goals and strategies.
- Organizing: Arranging resources to achieve trading goals.
- Actuating: Implementing your trading plan.
- Controlling: Monitoring and evaluating trading outcomes.
- At year-end, you perform the Controlling phase to evaluate results and plan for improvements.
Steps in End-of-Year Trading Review
Evaluate Your Trading Performance
- Evaluation Steps:
- Calculate Total Profits and Losses
- Total Profits: Sum of profits from all trading positions.
- Total Losses: Sum of losses from all trading positions.
- Profit-Loss Ratio: [Total Profits] ÷ [Total Losses]
- Calculate Average Monthly Performance
- Average Monthly Profit: [Total Profits This Year] ÷ 12
- Average Monthly Loss: [Total Losses This Year] ÷ 12
- Calculate Percentage of Winning and Losing Positions
- Percentage of Winning Positions: (Number of Winning Positions ÷ Total Positions) × 100%
- Percentage of Losing Positions: (Number of Losing Positions ÷ Total Positions) × 100%
- Determine Number of Margin Calls
- Number of Margin Calls: Frequency of margin calls throughout the year.
- Example Calculation:
- Category | Value
- Total Profits | $3,000
- Total Losses | $1,200
- Profit-Loss Ratio | 2.5
- Avg. Monthly Profit | $250
- Avg. Monthly Loss | $100
- % Winning Positions | 60%
- % Losing Positions | 40%
- Number of Margin Calls | 2
Evaluate Adherence to Trading Plan
- Evaluation Steps:
- Review Your Trading Plan:
- Did you follow the established trading plan?
- Did you deviate from the trading plan?
- If yes, what were the reasons?
- Evaluate Achievement of Targets:
- Were your set targets achieved?
- If not, were the targets too ambitious or too conservative?
- Example Evaluation:
- Criteria | Outcome | Evaluation
- Trading Plan Followed | Yes | Compliant
- Profit Target Achievement | No | Target too ambitious
- Deviation from Trading Plan | Yes | Lack of discipline
Identify Corrective Actions
- Steps for Corrective Action:
- If there were deviations in implementation:
- Improve Trading Discipline: Establish stricter rules to follow the trading plan.
- If targets were not met:
- Revise Targets: Adjust profit targets realistically for the upcoming year.
- Example Corrective Actions:
- Issue | Corrective Action
- Lack of Trading Discipline | Establish a more regular trading schedule
- Targets Too Ambitious | Adjust profit targets based on capacity
Planning Improvements for the Next Year
- Improvements in Implementation
- Improvement Steps:
- Enhance Trading Discipline
- Schedule Trading: Establish a consistent trading schedule.
- Follow Plans: Adhere more strictly to the trading plan.
- Improve Trading Skills
- Training: Attend trading courses or seminars to enhance skills.
- Adjustments in Planning
- Adjustment Steps:
- Revise Trading Plan
- Set New Targets: Adjust profit targets and trading plans for the next year.
- Enhance Risk Management
- Adjust Risk Strategy: Modify risk management strategies based on evaluation outcomes.
- Example Improvement Plan:
- Plan | Description
- Profit Targets | Adjust targets to be more realistic
- Risk Management | Reduce per-trade risk from 2% to 1%
- Trading Discipline | Establish stricter trading rules
Learning and Rediscovering Passion in Trading
- Increase Trading Knowledge
- Knowledge Enhancement Steps:
- Study Trading Books: Read the latest books on trading.
- Attend Webinars and Courses: Participate in online trading courses or webinars.
- Rediscover Passion in Trading
- Passion Rediscovery Steps:
- Evaluate Positive and Negative Effects
- Write down what you enjoy and dislike about trading.
- Stay Enthusiastic
- Set new goals and maintain motivation to learn more.
- Example Passion Reflection:
- Enjoyed | Disliked
- Market Analysis | Emotional pressure
- Trading Strategies | Losses
The end-of-year review is an opportunity to assess your trading performance, identify strengths and weaknesses, and plan improvements for the next year. By conducting a thorough evaluation, you can create a better plan to achieve future success. Follow these steps to be better prepared for the new year with improved strategies and a more positive attitude toward trading.