How to Solve Trading Problems and Constantly Improve (2024)

Recently, I asked a question on Twitter:

It’s about time I shared my own answer — though if you’ve followed me for a while, you may have already guessed, as I alluded to it in this stack. It’s Tom Dante’s (@Trader_Dante on Twitter) “Stop Moaning And Start Improving Part 2”:

(I didn’t include the “Part 2” in the subtitle to avoid confusion — ‘part 1’ in the subtitle refers to the part within my stack series.)

As Tom trades very different markets and strategies to myself, this may appear a surprising choice. So allow me to explain.

Developing my edge

While I learned at a fairly early stage that journaling was a critical part to improving as a trader, I hadn’t figured out an effective way of doing it (beyond tracking the basics like average win, average loss, strike rate, etc.). Tom’s video showed me how I could really crunch my numbers in a useful, effective way.

This enabled me to identify my strengths and weaknesses, which really helped direct my trading. It marked the start (of an ongoing journey) towards developing my own style, based around my edge, and improving my confidence.

A practical psychological tool

To get a little bit into the psychology side of trading, I think that a lot of losing traders lack confidence simply because they’re losing. That can become a vicious circle: lack of confidence → lose money → lose more confidence → lose more money → etc.

So how can journal analysis help? Well, it can categorically tell you, with hard numbers, in which areas you are profitable, even if your overall account is down. For example, I discovered that I was actually comfortably profitable in large caps. Now, categorically discovering that I was profitable in at least one area boosted my confidence in a way that probably nothing (or no one) else could have.

By extension, learning about these types of quantitative analysis techniques for trading journals opened my eyes to a completely different way of building conviction. It certainly made me rethink trading psychology. (Which we’re coming back to later in this post.)

Don’t get me wrong: improving your mental game is a vital component to reaching the top in any field where peak performance under pressure is key, as I discussed at length here.

But I think that the mechanical components towards that destination are generally underestimated in the trading community, particularly for people such as myself, who can’t develop conviction with the charts alone. So if you’re wired like me, and like to see the hard numbers/data before you truly believe anything, this stack series is aimed at you!

Or if not, this type of journal analysis can just become another tool to add to your toolbox — to confirm what you think you already know, for example. Either way, I think it’s a great way of learning really profound trading truths about yourself, in a relatively short space of time.

About my notes

I always say this about my notes, but today I’m underlining this even more strongly than usual: please watch the full video for yourself (whether before or after reading my notes) to really get the most out of it. My notes only capture my main takeaways from the video — they don’t detail all the stories and examples that Tom discusses, which are both highly educational and entertaining!

Also, I realise that my “Know Your Numbers” stack already covered a few big lessons from Tom’s video, so if you’ve been following me for a while, you may have seen some points before. But I do think it’s worth revisiting good content! What’s more, this time my notes are going to be much more detailed, and focusing on this video only. However, what I won’t cover again are the statistics of losing streaks, which I’ve already talked about in detail here and here.

To immediately get a sense of what Tom is like, early on in the video (3:31), he expresses his view — in no uncertain terms — that “the reason most people fail is mainly because they’re f**king lazy and stupid”.

Yes, that’s pretty blunt, and no doubt will offend a few people, but I appreciated hearing it, both when I first came across the video and today. I don’t want things sugar-coated: I’d much rather just be told the truth, and if it’s one I’m not happy with, I need to do something about it. We might not be able to control the markets, but we can certainly control the amount of work we put into preparing for those good times when they come round.

Furthermore, Tom doesn’t make these statements without proposing solutions too. Better still, those solutions are incredibly simple, practical things any trader can do if they just put in the work. Those practical suggestions are what this stack series is going to be focusing on.

Oh, and yes, this is going to be a multi-part series, as there are so many gems in this 44-minute video! Today’s part is about giving you a sense of what Tom is like, and a high-level focus of the video: how to solve trading problems and constantly improve as a trader by analysing your journal in a smart way.

Solving problems

As a trading mentor, Tom has students who come to him with trading problems, like getting out too early. After Tom has heard a given student bring up the same problem a few times, he asks them how they plan to resolve it — only to get a confused look back.

He therefore says the following (4:35):

“This is what it comes down to: having a journal and constantly seeking to improve. If you’ve got a problem, you’ve got to look at what that problem is, why you’ve got it and what you’re going to do about it! Because problems don’t just f**king solve themselves. Not in this game. So you have to put the effort in.”

Incidentally, this aligns very closely to what Qullamaggie says. For example, during the 8 June 2023 stream, he said that he’s constantly being approached for help on issues like selling too early. But Kristjan can’t help other traders with that — he says they can only help themselves, by studying hundreds and hundreds of charts.

Admittedly, that’s a little different to studying a journal, but the principle is the same: don’t just moan about your problem, but do something about it! Study your journal, study the charts, study something else — but do something so that next time, you’re able to stay in a stock for a bigger move (given the right environment, of course), or do whatever it is you’re trying to achieve or improve.

Figuring out root causes

So, just to go into technical writer mode, this is the step by step to improving trading problems:

1. Identify your problem.

2. Figure out why you have that problem.

3. Come up with a solution to that problem.

In particular, it’s important not to skip over step 2. You can’t resolve a problem if you don’t know why you have it (which is often true in life too, not just in trading). But as I hinted at earlier, I think that the root cause often lies in not having done sufficient homework, especially among newer traders.

My best trading days — as in, the days on which my execution is at its best (not necessarily the days I make the most money) — are the days where I’ve really done my homework the night before, and have a clear plan that accounts for all the different scenarios. The days I’m most prone to losing discipline are the days where I’ve taken shortcuts the night before.

Sure, we’re all different, and that’s why we’ve all got to figure out our own solutions, but I have heard many stories that align to my own experiences: that studying harder and/or preparing better can achieve so much more than we think. It can certainly address the root causes of a range of trading problems. But whatever approach you take, just make sure you’re actually taking steps towards finding those solutions!

To put it in Tom’s own, frank words (9:26):

“Play around with ideas. Generate new ones. Refute them. Think outside the box, on top of the box, inside the bloody box, but, essentially, coming up with ways to improve should literally keep you awake at night. And if it doesn’t, well, I don’t think you’re ever going to be a great trader. That’s my opinion.”

Blaming psychology

I want to share another quote from Tom’s video (which I have shared before) that really had an impact on me when I first heard it. I’d certainly never heard any trader put it quite like this, but as a fan of hard numbers and statistics, it made so much sense to me. If I had to pick any single bit from this video that had the biggest impact on my views and discipline towards journaling, this is it (13:39):

“Getting out early is just one of those potential problems where people always seek the easy way out: to blame their psychology, and they start saying s**t like ‘oh, I’m so psychologically sc**wed up, I keep coming out my trades so early ‘cause I get scared, I get impatient’, ‘oh f**k, I better read Trading in the Zone again’.

“The reason you came out early is ‘cause you do not categorically know, over a large sample size, that holding is the right thing to do, right?

“If you know that, and you’re getting out too early, you don’t need a f**king psychologist — it’s quite simple: you’re an idiot.”

Now, again, I’m not saying psychology is a non-factor in trading. Of course I’m not. In any competitive endeavour, mindset and the ability to perform under pressure are often precisely the things that distinguish the champions from the rest.

But I do believe — as, evidently, does Tom — that people are prone to making excuses, rather than taking responsibility, and psychology is often a very convenient candidate to blame.

The corollary is that having the opposite mindset — being prone to blaming yourself, even when it’s unjustified — is precisely what can improve your trading and trading psychology. Because that mindset often goes hand in hand with trying to find solutions. To need to be doing something so that you can get better, resolve the issue and move forward.

In trading, that often means studying, whether it’s the charts, your journal, or both. In turn, that improves your confidence, conviction and execution, which are all linked to psychology.

The demon finder

See Also

Exploring Trading Demons & How to Overcome Them – Part 1 – Learning Day Trading

This is another thing I’ve shared before, but for those struggling with certain trading ‘demons’, as far as purely psychological tools go, I think this a pretty good one:

Essentially, if you’re executing your plan/system badly, you probably have a few demons to kill. To figure out which you have, and which are the worst (so must be killed first), Tom’s demon finder provides a very useful visual aid. Tom explains it further from 26:58. You can also download it for free from his website, after which you can change the default demons if required.

Mind you, I still think that many demons can be at least partially addressed by simply studying harder. That’s my opinion based on my experiences and observations from other traders. You’re very welcome to disagree with it in the comments, so long as any discussions remain respectful.

The key question, as Tom puts it, is this (5:23):

“What have you done today to improve as a trader?

“You might not feel that you’ve made tangible progress, but have you f**king done something that is taking a step towards improving?”

Tom tries to ask himself this question every single day. Regardless of how much experience a trader has, they never stop learning. So with that in mind, Tom puts forward three questions for you to have in mind when you’re reviewing your performance:

1. How can I make more money from my winners?

2. How can I lose less money on my losers?

3. How can I generate more winning ideas?

As a simpler way of putting it, what are you going to do better today vs yesterday? This week vs last week? This month vs last month?

The goal is to always be getting a little better. If you’re ruthlessly improving yourself, even only a little at a time, on a very consistent basis over a significant time period, you can achieve amazing results. Compounding little improvements and good habits can be just as powerful as compounding money.

Journaling software

Back to the three questions. In Tom’s view, to answer them, you need to keep a trading record or journal, and take the time to properly review and analyse it. Tom recommends Edgewonk for this, though acknowledges that Excel works perfectly well too.

Personally, I recommend Excel for a few reasons:

• Particularly if you’re not consistently profitable yet, I think it very prudent to leverage free (or in this case, existing) tools as much as you can to mitigate avoidable costs as much as possible.

• I think there’s a lot to be said for manually inputting trades, as I explained here. In short, I believe that if you force yourself to manually enter all your trades, it’s far less likely that you’ll take bad ones. It’s also an effective way of addressing overtrading, and probably other discipline-related issues too.

• I like how you get the flexibility to track whatever you want. I think that if you rely on software built by someone else, which was not designed to meet your specific needs, you’ll always run into some sort of limitation sooner or later.

Recording vs analysing your trades

Whatever software or medium you use to record your trades, it’s important you recognise the significant difference between simply recording your trades and actually reviewing or analysing them. I’ve quoted the following from Tom’s video before, and am including it again here, because it had such a huge impact on me when I first heard it (7:45):

“There is a […] huge f**king difference between recording and analysing your trades. Some people spend all their time writing down their trades […] in a book or in a blog or in an Excel sheet or whatever — and then, believe it or not, they don’t actually review them.

“If you have a record, and you don’t look at it frequently, you might as well not have one. It’s not a list of trades to stick in a bleeding folder on your computer to read back on it one day like a f**king diary. It’s there for one reason and one reason only, which is to make you a better trader.

“If you’re winning, it’s there to make you more money, and if you’re losing, it’s there to turn it around, and make sure that you can perform and start making money.”

Tom journals so he can get better results than his peers, but also uses his past trades to discover new patterns he wasn’t previously aware of.

More content like this

I hope I’ve piqued your interest with part 1! The remaining parts are as follows:

• Part 2: Active trade management vs walking away, and opportunity capture.

• Part 3: Allocating risk (i.e. position sizing) according to different variables.

• Part 4: Generating new ideas and coming up with new patterns.

To get those parts (which include specific Excel techniques) straight to your inbox, as well as other future posts, please do subscribe:

Please do also give this post a like and share it with other traders if you found it useful.

I’m also always looking to get better, both as a trader and as a writer, so do let me know if you have any constructive feedback in the comments below. Alternatively, you can message me on Twitter or email me at kayklingson@yahoo.com.

All my stacks related to journaling are here. All my Tom Dante notes are here.

The Trading Resource Hub’s full archive is here.