The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

HOW TO GRADE YOUR PERFORMANCE

A person who trades without measuring and grading his performance is like someone who calls himself a competitive runner but does not own a stopwatch. Only a recreational runner can jog around the block without timing himself, to get some exercise and enjoy the scenery. There is no “recreational trading”. This is why I suggest grading all trades on three scales: your buy grade, your sell grade, and—most importantly—the overall trade grade.

You can measure the quality of your buying and selling by the location of your trade within that day’s range. When you buy, you want to trade as close to the low of the day as possible. When you sell, you want to trade as close to the high of the day as possible.

The result is a percentage: if you buy at the low of the day, your grade is 100%, and if you buy the top tick, your grade is 0. Grades below 20% are poor, above 50% good, and above 80% superb.

The result is expressed as a percentage: if you sell at the top tick of the day, your grade is 100%, and if you sell at the bottom tick your grade is 0. Here too, you want to score above 80% for an excellent grade, while anything below 20% is poor.

Whenever I trade, my goal is to score above 50% on my entries and exits. This means buying below the midpoint ...