Page 424 - THE MARKET WHISPERER

420 PART 11 - Risk Management

understood, I wrote it all down, and I have no intention of making that
mistake!”

I know that’s what they’re thinking, but that’s not how it works in real
life. In real life, they’ll make every mistake covered by this book. For each
mistake, they’ll pay with their hard-earned money. Nonetheless, the big
advantage is that unlike others who did not study the rules of trading, they
have learned what those common mistakes are. Most traders active in the
market try to learn by themselves and from their own experience. That,
too, is a mistake. Trying to learn trading by yourself means you cannot
pinpoint the common mistakes and try to avoid them, thus prolonging the
process of gaining experience and knowledge. So while even someone who
has taken a course will still make mistakes, that person will be more aware
of what to avoid, and will err less frequently. Identifying and acknowledging
your mistakes is the first and most important step to eradicating them.

Keeping an ongoing diary is the perfect solution. It will help you
understand when you have erred, and how to handle the situation in the
future. When I started out trading, I read an article on keeping an activities
diary. Truthfully, at first I could not understand how important this aspect
was, just as it likely sounds to you now that I am filling your head with
petty ideas. I was sure I remained aware of my mistakes and that I had no
need of further documentation. In retrospect, I was sorry for not keeping a
diary earlier. I discovered the need to manage an activities diary the hard,
costly way. If you take my advice, you will save yourselves an unnecessarily
long and expensive learning process.

SMART An amazing thing will happen to you when you start
MONEY keeping your activities diary. You will find that the kinds of
mistakes you make are within a relatively small range. If you
see the same mistake showing up all the time, then it’s time
to make a change!

My wife, without even realizing it, helped me realize the need for an
activities diary. When I started my trading career, I would repeat one of
the most common mistakes of new traders: I would buy at the right time
but then sell at too small a profit or too great a loss. Every evening I would
tell my wife more or less the same story, “If only I had done this… or not
done that… I would have made a bigger profit…” Every day it was the same
thing, until she got sick of hearing how I “almost” made money. What was
abundantly clear to my wife, but not to me, was that I described the exact