Whenever I make mistakes in trading (i.e. did not follow my trading plan), I like to deep dive to figure exactly why that happened, why did I take a certain action?
- What was I thinking?
- Why was I thinking that way?
- Was what I was thinking correct?
- Should my thinking be changed?
- How should I think about it the next time?
- How do I effect the change in thinking?
- What was I feeling?
- Why was I feeling that way?
- Should I be feeling that way? Is it driven by false beliefs or irrational beliefs with respect to how a market functions?
- How should that emotion response be modified for the next time I see the same scenario? How can that be effected?
To answer all the questions above so as to effect positive change, you need to monitor your thoughts and feelings as you are trading, you need to have awareness of what is going on inside your mind.
Whenever you think that you have made a bad trade (based on process, not P/L), quickly jot down what you were thinking and feeling that led to you taking the action. You can then use that during your trade review process to figure out needs to be done to improve your trading moving forward.