People spend a lot of time analyzing their individual winners and losing trades looking for some sort of insight that will help them crack the code. Maybe if I choose a different moving average or if I cut my losses earlier. These all are helpful things when looking at one or two trades, but how would this impact all of your trades? Have you honestly maintained the same system long enough to even analyze how minor tweaks could help?

For me reviewing individual trades is critical, but even more important is the review of your equity curve. This allows you to take a bird’s eye view of your trading performance. The crazy thing is if you plot your equity curve you will see some of the same patterns that you see in price charts. As we speak for the year of 2015, I have a quadruple top at 70% return. I am now sitting right around 50%. Over the last 3 months every time I hit 70% I would have a nonsense trade that backs me off my high and then I quickly march right back up there again only to be denied. What hit me just this past week is that every time I approach the high, my appetite for risk diminishes. I am so worried that I will somehow lose the money that I begin to trade so conservatively that I slowly erode any gains until I pull away from my account peak. I know that I am losing my appetite for risk because when I back off my account highs it is a slow process; however, after backing off I will run right back up to my account peak in 20% or less of the time. This is only because after the pullback, I go back to trading loosely and with confidence. The difference between me now and me 2 years ago, is that (1) this back and forth process may last 6-8 weeks versus years, (2) I can see when I am displaying this type of behavior and (3) I know that it’s not my system but rather it’s all in my head.

So, my point in telling you this story is that when you review your equity curve you can see clear as day psychologically how you are processing the information presented to you by the market. It is better if you start your review of your account first by looking at the equity curve before you go into each individual trade. This will let you know if it’s really your system or if it’s you sabotaging yourself.