Succeed as a trader in 2025! The ultimate end of year review process - #244
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Welcome back to the TradeCities Traders Improve podcast. I'm your host and my name is Rolf. I have been trading for over 16 years. I've also co-founded TradeCity.com and the Edgewonk.com trading journal. I am recording this week's podcast roughly two weeks before the end of the year 2024. And I thought this is the perfect time to do an episode on an end of year review. How do you end your year the right way as a trader?

How do you go goal setting for the next year? What do you look back on on your last year? How to do a performance review and what to review actually. So I put together a step-by-step podcast episode that will give you a framework, some steps, tips and other important things that I think will help you use the last two weeks of the year in the most optimal way.

I also think that in the last two weeks of the year, I don't think there should be a huge focus on actual trading. 50 weeks have passed this year. You're either losing or maybe break even. Maybe you're profitable already, but in the last two weeks of the year, you're not going to make a big difference.

And I think there is way more value in actually closing your trading screens, closing your broker platform and making sure that you review the last year and then also set new impulses and goals for next year. I think this is going to be way more valuable than just keep on trading and then never really do any of those things that we are talking about. So the first thing I think that should be on your to-do list is to do a performance review.

And I have a very well-defined plan here for you, what you should review and some pointers and questions that you can ask. I will also put all of this in the podcast description so that you can go through it. Maybe you can copy paste it into a Word document, print it out, put it into your Edgeprong notebook and then answer those questions for yourself.

I think this is really, really helpful. And you're not going to get too much out of it just by listening. You can, of course, and you should listen to this podcast because I will give you some ideas on all of those points that I'm going to discuss and that you can copy and paste. But you should really answer those questions and you should really get to the heart of them. So

During your performance review, there are metrics that you can assess. So what I would recommend is that you find your 5 to 10 largest winning trades and your largest losing trades. And then you look for similarities. What do they have in common? On your last winners, you want to see if there's some overlap. What caused those trades to be large winners? Was it an exceptional great setup?

Did you manage them really well? Was it a good higher time frame that supported your trade idea? What stands out about those winners and find what they have in common? And then on your largest losses, equally important. I've seen very often that two, three, four very large losses can wipe out weeks or even months of good trading results. So it's really important to also get to the core of

Why do you have those large losses? Is it a problem with your risk management, so you're risking too much? Is it maybe you're moving your stop loss away as the price keeps going against you, which is a very big problem? What has happened there? Are you revenge trading? What is going on here? And you don't want to write essays here. You want to write down a few bullet points that you can come back to later and review very, very quickly. You don't want to look at a wall of text and then

be discouraged because you're not getting any meaningful message out of it. So keep it down to a bullet point format, write down a few points here and there, and that's going to help you with your review later. Look for the most and least profitable confluence factors. So this means you are going into your edge rung and you look at your custom statistics. Good custom statistics could be, for example, a time frame.

What time frame are you trading the best at or which time frame is causing you the worst performance? Really helpful. Also the

the time of the day and the sessions. What session are you trading most profitable? What session is not providing you good results? You could also look for specific indicator settings. If you're using the custom stats in Edgewonk, which you should, they are a really great feature, then set up a custom stat for your different indicators or tools that you're using and then look for the tool that is giving you the best possible results. Which good trades

have similar custom stats present and look for those. Also look for the strongest performance or the period of the strongest performance and underperformance. In Atrong you can do that very easily. Go to your reports and then go to the monthly reports and look for the highest and the most profitable month of the year. When did you perform very well? And then think about what happened there. Was it a personal situation?

Maybe you took extra good care of yourself, of your body, you ate well, you went to bed early, you didn't drink alcohol. Was it related to that? Or look at the chart. What happened during those trades where you performed really well, that month where you performed really well? Was it that the overall market was in a very good state?

What is causing that? And also look at the underperformance. When was the time where you performed worst and what was happening there? Again, you can look for personal and lifestyle confluence sectors or look at the market. Was the market in a sideways period where there was no trend for a month or two months and you just took trades in an environment where there was no movement? Really, really important findings here as well.

Look for your maximum drawdown. What was the worst drawdown that you had during this year? In Edge1, go to the chart lab and then click on the drawdown graph and see when was the lowest point on that drawdown graph. And then find out, first of all, look at when this happened, so what was the time. Look at how many trades it took you to get into the drawdown and to get out of the drawdown.

and then focus on that period. In Edgewonk you can do that very easily. Open the filters at the top, then click on the date range filter and select that period where you had the largest drawdown and look at those trades. What was going on there? Did you break your rules repeatedly during that period or did you follow the plan and the trades just didn't work out? Or you just risked too much or you mismanaged your trades? Really important.

And while you are there and looking at the tiltmeter, look at the percentage of how well you are following your trading plan. For that, go to the EdgeWonk Home tab, click on the percentage icon and then look at the right evaluation box and it shows you the trades, how often you have followed your trading plan.

Generally speaking, you want to see that it is at least above 50. Ideally, you want to see it above 66%, which is two thirds. So most of the time you're making good trading decisions and sometimes you are messing up. As long as those trades where you mess up are not causing huge losses, generally speaking, you should be fine. But it's really important to audit that.

Then comes the strategy review. Which strategies work well and which underperformed? So if you're trading multiple setups or strategies, try to rank them based on the performance. Again, in EdgeWong, super simple. Just go to the performance by setup and look at the performance or the best performing setups. I've seen very often that traders who trade maybe 10 or 12 different setups and strategies, they have two outliers that make up most of their performance.

In such cases, I would recommend, especially if they are overall not really profitable, maybe break even or even losing, the next three to six or eight months only trade those two very profitably performing setups and strategies and ditch the rest. And that should give you a more streamlined approach to trading. It should free up a lot of mental capacity because you're only focusing on two things.

It should also make your trading time much shorter. The data that will be collected in your trading journal for only two strategies will be more meaningful. And that's a really, really great way to reduce the noise and improve the whole approach of your trading.

Evaluate the trades that deviated from the plan is important. So look at what is the one thing that is causing you the worst trading results? Is it revenge trading? Is it managing your trades in an inefficient way? So you're cutting your trades too early or you're moving your stop loss away as the price is going against you or are you risking too much? Those are really, really important things that you need to find out as well.

And again, pick one or identify one thing here. What is making the biggest negative impact on your trading? Don't try to look for 5 or 10 things that you need to change. Look for one thing that is really causing the biggest problems. Because if you fix that, it's going to have the biggest impact in your bottom line. Also one thing that is important is look for the impact and the reasons for why you are missing trades.

A lot of traders are often missing trades and there can be many different reasons. It could be that you're just not focused enough, so you haven't done your chart work properly, you haven't set up your trade plans, you haven't done trading plans in the morning, you have not used any price alerts,

Or it could be any other reason, but try to find out why you're missing traits. Is it a lack of confidence and you're not ready to pull the trigger? And then try to work on that. The last point for the performance review is that you should document key takeaways. So look at the best traits, what worked well and why. Look at the worst traits. What lessons can you learn here? Look at your missed traits. Why did you avoid them?

And then the final opportunities. What do you want to prove next year? Find one thing or maybe two things that you want to improve to set new impulses. Again, all of those things that I'm talking about will be listed in the podcast description so you can just copy paste it and then go through the list. Next is a risk management audit. First, assess your risk rules. So you look at your position sizing, your stop loss placement and your overall risk exposure.

So do you risk a consistent amount such as 1 or 2% per trade or is your risk all over the place? This can introduce a lot of noise and it can over and undervalue your trades and really mess up your performance.

Is your stop loss placement an issue? Are you constantly messing with your stop loss placement? On one trade you have a very wide stop loss, on the next one it's a very tight stop loss. That will also introduce a lot of noise in your trading. Make sure that you analyze that. Update your risk management plan. So adjust your risk tolerance based on the results that you have experienced. Look at your last year and see if you have very wild swings in your trading account.

If you have very wild and huge swings in your trading account development, it could be related to too much position size. And if you're risking too much or if you used to risk too much in this past year, then next year try to implement a good position sizing and consistent position sizing strategy. I think having a consistent position sizing strategy is one of the most important things

that you should be doing especially if you feel emotional about your trading and if the psychology is an issue for you a lot of those mindset related issues can be cured by just using a more consistent and more conservative risk management approach another thing here is that you should look at your trade management so audit your reward to risk ratio that you are shooting for and then look at the impact of your trade management i've seen a lot of traders

who say and believe that they have a trading system with a 4:1 or 5:1 reward to risk ratio, and they believe that this is a very good performing high reward to risk ratio system. But then when you look at the outcome of the trade, you will often see that those winners are actually quite small and they're not as large as traders believe or what they hope it would be.

And that is often caused by mismanaging the trade where the trade moves a little bit in their favor and then they are too scared to let the trade run until the take profit target. And that's a huge issue, obviously, if you're always cutting your winners too short. And it could easily ruin a good profitable system. Just in my last podcast, I talked about

the impact of trade management, win rate and reward to risk ratio. So make sure to look at and listen to that if you think that problems with your risk management is or trade management rather is an issue for you. Next point number three: Update your trading business plan. So first of all you should ask yourself do you have a well set up business plan in the first place?

A business plan is a document that really defines all areas of your trading and it helps you reduce noise, inconsistencies and provides a very good framework and guidance in your trading.

A good business plan should include all of the trading rules that you need to have to get into a trade. Also for stop loss placement, take profit placement, how do you manage your trades, what are the timeframes and the assets that you are following, what are your risk management principles, so what is the reward to risk ratio that you're going for, how do you manage the trade, what is the position sizing, do you have trade management and drawdown rules.

What do you do after you have two or three or four losses in a row? Do you even have some rules for that or you just keep trading? A lot of traders will probably do better if they have drawdown rules where after two or three losses in a row, they will close their computer and walk away and come back the next day to let off and blow off some steam and not stay in front of the screen when they are very, very emotional. Also, a good business plan has guidelines for dealing with news patterns.

So what do you do when a news release is coming up and you're in a trade? Do you get out of a trade? Do you scale back? Do you take partial profits? Do you move your stop loss? And the goal of a trading business plan is really to guide your decision making in

any possible situation. And whenever you find yourself in your trading and you are not sure what to do in a specific situation, that's a very good point that you should address because that's an opportunity to plug the hole of your trading business plan. And once you have defined this previously unknown situation where you are not sure what to do in the future, this will just remove noise and you will be able to trade with more confidence because you know exactly what to do.

Next point number four is that you should review lifestyle and health habits. And trading performance is very closely tied to your mental and physical health. You should reflect on your work-life balance. Do you have time for hobbies, for other things? Do you even have hobbies and other interests?

that you enjoy doing besides working and trading. And I found personally over the last few years that this is such a big, big game changer. In the beginning, I was guilty of that as well. And my mental health really, really suffered because I didn't take enough breaks. And I think if I would have had another outlet where I had something else besides trading and working,

that would allow me to have something where it's not about making money or not about growing and performance improvements, where I do something just for the fun of it. I think it would have made big impacts on everything else in my life. So make sure that for the next year, maybe one of the goals could be that you find something that you are interested in, that you can pick up as a hobby, that you try something new and improve your work-life balance.

Prioritizing sleep exercise and mental well-being should be a no-brainer, but I know in this busy time, especially when you have a very busy life,

Often we are sacrificing on those areas where actually they are the ones that should be mandatory to optimize. So make sure that you go to bed at a good enough time, don't drink as much alcohol or better no alcohol at all. Exercise regularly. You don't have to do crazy workouts, but at least going out for a walk every day for 20 to 30 minutes is already a big improvement if you otherwise

very sedentary. Read more, read good stuff, read and consume less negative stuff on social media, news and all of that, that will have a negative impact on your mental health.

Plan time off or breaks to recharge and avoid burnout. Something that is very near and dear to my heart because I neglected that and I can now speak from personal experience. You need to have time off. Nowadays, I have one day off completely from my computer per week.

every Saturday or Sunday, one or the other, I don't even turn on my computer and I didn't do that for 10 or 12 years at all and I just kept working and just sitting in front of the computer pretty much 24/7. Obviously that's not gonna work out long term and the earlier you start to include breaks and give yourself a timeout, the better it is. So make sure that you schedule breaks, timeoffs,

and that will have huge, huge benefits. Now I want to talk about goal setting for the next year. And we can talk about three different categories of goals here. Behavioral goals. So focus on consistency, risk management or reducing emotional mistakes. Those are all behavioral goals that you can focus on. For example, I will not risk more than 2% per trade or I will walk away from my trading screen after two losses in a row.

or I will stop managing my trades and I will implement a set and forget trading approach

Those goals should be derived from the findings that you made in the beginning of this review. When you looked at your trading journal and you looked into Edgewonk, you looked for the biggest outliers and then you see what is the biggest problem here. And that should then lead to a goal that you will implement going forward. Write it down. Just don't keep it in your head. Write it on a post-it note, put it in front of your screen, and you will be way more likely to keep that in mind going forward.

Skill development: identify areas for improvement where you're not feeling confident. Is it technical analysis? Is it fundamental? Is it multi-time frame trading? Is it trading psychology? Is it journaling? Is it backtesting? Any of those things, if you get better at them, will help you also become a better trader. And then commit to educational activities like courses, reading books or going for coaching.

Me and Moritz, even though we have been trading for many, many years, we still go to seminars from other teachers. We read books a lot. We book coachings. We talk to other trading coaches and there's a never ending learning curve here. And I think this is also what makes it fun and keeps it fun is that when you're always challenging yourself and you're trying to grow, you will get to know yourself better and

you will find areas that can make a huge impact on your bottom line. And then process-oriented goals: focus on actions that you can control. So I don't like results-oriented goals where you say I want to make 1% a week.

or I want to realize 5R per month, I don't think those are valuable trading goals because that's completely outside of your control. But process-oriented goals can be really helpful. So you can have a process goal that you want to prepare your charts every morning or every evening before you go to bed.

Maybe you have seen in your review that you're often missing good opportunities and in the morning you don't really know what to look for, then that could be a good goal. Stick to your trading plan. It can be a very good goal if you're not good at it. What I would recommend here is that you write down your checklist for your trades.

So pick a strategy or setup that you're trading, write down the rules and the criteria that you need in order to get into a trade, print it out and put it next to you when you're trading. That could be a good goal. Journaling trades daily. If you're not good with your journaling routine, make sure to implement a journaling habit that will help you a lot. Just journaling for 20 minutes every two days should be enough unless you trade like five or ten trades a day.

If you trade a few times a week, then that is more than enough in your journal and the insights that you will get from your journal are just going to be priceless.

Following your risk management rules can be another very, very important goal to have as a process oriented goal. So you write down the percentage of risk that you want to risk per trade, and then you try to hit that goal for every trade that you are taking forward. And again, all of the goals here, they should be derived from the previous steps where you looked at what is missing in your trading, where do you see the biggest negative outliers, and then write it down. The writing down step is really important.

Otherwise, it will just stay abstract in your head and you're not really as committed. But once you write it down, maybe even print it out. If you have a corner where you're trading, stick it to the wall and then you will be able to see it every day. You will be able to review it and it's going to make it way more likely that it's going to stick. And final, maybe the most fun part, I don't know, you tell me, celebrate and reflect.

Again, as I said in the beginning, the last two weeks of the year, they're not there for making huge progress on your account growth. Don't trade the last two weeks. Take it off and make sure that you have a good end of year review. Make sure that you have written down your goals, you have identified problem areas, you set new impulses. And then also just take your mind off of trading for 10 days, for two weeks, whatever it is. But

Take your mind off trading and you will see that next year in two weeks, in three weeks, you will come back to your trading desk more motivated, more ready because now you have a bigger picture view why you are doing this. What is your plan for a tech going forward? And I guarantee you that if you take the time to do a proper end of year review, don't trade for another 10 days, you will come back next year and you will feel ready. You can also look back at your last year.

How much progress did you make? Pull up your Atron Trading Journal and look at the trade that you made in 2023. How has your outlook on trading, on charts, on your mindset changed?

recognize that progress. A lot of traders only look ahead and how far they have to go, but not a lot of traders look back and appreciate how far they have already come. So I think that's a really good outlook. And then just enjoy the process. Don't look at short-term results. Understand that you have time. Don't rush it. And then enjoy those last two weeks of the year and put yourself in the best possible spot to succeed next year.