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​The Mindful Trader Newsletter !​
​Issue #2 - May 6, 2023

Before you continue reading the newsletter, there is one good piece of news.
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You can download an Excel Trade Journal Reference file at the end of this newsletter, making it easier to document your trades.

Now there are 3 types of traders:

1. Who doesn’t learn from their trading mistakes.
2. Who learn from their trading mistakes & improve their performance based on that mistakes.
3. Who learn from their trading mistakes but forget those learning after a few weeks and start repeating the same mistakes.

There is no issue if you are in type 1 or type 2.

Type 1 traders will lose their money in no time and realise that they need to learn from their mistakes.

Type 2 traders will anyways, do well.

The main issue is with Type 3 traders (I was a Type 3 trader for a long time)

They do not even know their main problem; they keep feeling that they are learning from their mistakes/loss trades and feel good about it, but in reality, they keep forgetting their learnings, so there is no real scope for a major improvement in their trading performance.

The mind has patterns that decide how you think; repeating the same pattern multiple times ( making the same type of trading mistake) becomes a habit.

I recommend maintaining a practical trading journal if you are a Type 1 or Type 3 trader. I used the word practical because don’t maintain it for the name sake. You need to study, analyse the mistake patterns and review them on a weekly basis in order to improve your trade performance.

When you start looking at your mistakes on a weekly basis and want to correct them, new thought patterns will start forming in your mind, which, if reminded enough times to your mind, will start working for you in the live market because now your mind is trained not to repeat the mistakes because it is well aware of the further consequence of that once single mistake:

How to make the best use of the Trade Journal:

1. Download the Excel journal format attached at the end of the newsletter and update it on a daily basis / whenever you take the trades. The columns in the Excel sheet are self-explanatory.
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2. When updating the “Improvement Points”, - Do give numbering to each type of mistake, and note it down with the same number whenever you make the same mistake.
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3. Say you documented 50 trades, of which you made 30 loss trades, but many of those loss trades might have common mistakes. Say mistake number 5.
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4. You need to identify which mistake you repeated the most in the last 3 months and Rank it as the Top 1 mistake to start working on it.
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5. You can filter the top 3 mistakes every week when you sit for analysis. Doing a detailed analysis of your trade journal once a week, preferably on weekends, is preferred.
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6. Once you identified your top 3 mistakes using the last 3 months of trade details, now is the time to start working on them.

Each mistake has a different way to work on it.

Any trading mistake can be grouped under any of the following tags.

A. Technical Mistake
B. Risk Management Mistake
C. Psychological / Emotional Mistake

If you can figure out which type of mistakes you are making, it becomes easy to start working on it.

A. Working on Technical Mistakes:

You will have a low win rate if you consistently make technical mistakes. The main reasons can technical mistakes can occur are:

1. If you are aware of the right strategies to be used.
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2. You might be just aware of the strategies but not have enough experience to deploy it in the live market; you might be making simple technical mistakes like, not waiting for candle close, entering at fakeouts, placing the stop loss at incorrect levels or entering random trades without waiting for correct setups.

Technical mistakes can be rectified only if you understand appropriate strategies for different instruments and market conditions. If you are an options trader, you need more concepts to be cleared than just strategies, like OI analysis, Option Greeks, Adjustments, Strike & Expiry Selection, Hedging Etc.

Also, focus on the right identification of fakeouts, as many traders make mistakes entering at wrong breakout trades. You may refer to the below post for more on “Identification of Fakeouts” https://www.instagram.com/p/CrS9LKlvdvu/​

Keep testing the strategies on a regular basis; you won’t get perfect in one go. It’s a continuous process of getting better at price action trading.

B. Working on Risk Management Mistakes:

It’s one of the easy mistakes to rectify, but many traders will realise that very late until they lose substantial capital.

Two Main factors in risk management are control.

1. Defining and adhering to the Max Risk that can be taken per trade/day/week & month.
2. Defining and adhering to Position Sizing.

Traders with less capital tend to make most of the risk management mistakes. especially the Option buyers, who risk 10 to 20% per trade while the max limit is 2%.

In my experience, risk management is key in drastically improving trading mindset and psychology. Many traders will realise it late.

Even if it takes time, accumulate a decent amount of capital and follow the perfect risk management to sustain yourself in the markets for long periods.

C. Working on Emotional / Psychological Mistakes:

One or two newsletters can’t explain this; it’s a continuous development process based on their mistakes and experience. There are no standard hacks that can be applied to all.

Over time, we will dive deep into interesting newsletters to improve trading psychology.

For now, understand that you can only improve your emotional mistake if you are aware of it in the first place. The trading journal Excel attached contains a column to note the Emotions you went through during that trade.

It’s important to understand what is the dominant emotion that you have when you especially take big loss trades.

Emotions can be broadly categorized into:

FEAR - GREED - EXCITEMENT - FRUSTRATION - REGRET - HOPE

Most of your big loss trades can happen due to any of these emotions. Step one is to identify your dominant emotion, and you can dive into Sub emotions and start working on them.

Each emotion has a different method of correcting it. We can explore more Emotional Trading in upcoming newsletters.
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Download the Trade Journal Reference file here 👇🏻
​Trade Journal Reference.xlsx​

Hope today’s newsletter helped you in some way. I would appreciate if you can take few seconds and share your feedback as a reply to this mail.

Have a great weekend, and see you next Saturday.
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~
Arun Bau

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✅ If you are ready to learn A-Z of Options Trading, don't miss to checkout the upcoming "Options for Everyone" live mentorship here​

Lanco Hills, Hyderabad, Telengana 500086
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