Have you ever had an 'aha' moment when your life changed at least in a small way? Though I've pretty much done and seen it all when it comes to being a trader, I certainly wouldn't profess I knew all there was to know...so I make a habit of studying the art as much as I can. In fact - while working though a book on trading psychology - I had something of an epiphany I think is worth sharing with all of you.

It's something of a running joke (particularly on television) how a psychiatrist will lead a patient to mental well-being just by asking nothing but open-ended questions. Eventually - according to the theory - a patient will actually heal himself by vocalizing what his brain needed to hear but hadn't yet. The psychiatrist's job is to just ask the right questions often enough to make that happen. Whether it works or not, I don't know. However, the idea doesn't seem crazy.....no joke intended.

While I'm no psychiatrist, I have little doubt traders are poster children for psychiatrical case studies. Fear, greed, anxiety, paranoia, euphoria, manic, depressed....all are feelings I'm willing to bet each of us has had more than once in our trading careers.

Could it be the healing techniques most psychiatrists use in their office are also the best techniques for traders to use in getting a handle on their emotions? Are questions the answer? I think they may be at least part of the answer. In that light, here are a handful of questions I think may be worth answering (literally) as honestly as we possibly can. The more truthful you are with yourself, I think the more apt you are to grow as a trader.

For all the trades you've made within the last twelve months...

1. Can I identify one legitimate reason I entered each and every trade? (As a litmus test, go back and wrote each reason down.)
2. Did I make any entry or exit decisions on the fly? (while watching a TV show, scrambling to get logged into my account, etc.)
3. Did I justify letting my standards slide mid-trade for any of my positions at any time?
4. In cases where I did bend on my rules, did it actually help my bottom line?
5. Did I monitor my success rate? (average win/average loss, or number of wins/number of losses)
6. Did I apply an intelligent stop loss plan?
7. Did I adjust stops appropriately?
8. Did I have target/exit plan?
9. Did I apply my target/exit plan?
10. Did I look at the overall market or affected sector before making a decision?
11. Did I consider the impact each trade would have on my overall portfolio allocation?

I know answering these questions may require a little time to actually go back and find the data. But, that's kind of the point - it will force you to acknowledge how you're doing, and the actions you're taking to yield those results.

Ideally, you'd have all 'yes' answers, but I don't think that's realistic. I'd say of you can answer yes to 2/3 of the questions, you're actually doing pretty good. If half or more of your answers were 'no', maybe it would be worth spending some time developing a specific set of criteria you can use as guidelines for the next twelve months...provided you're serious about sticking to them. And, if you're not sure where to start building a trading plan, I'd suggest using the eleven questions above as a framework.

I think the whole topic is fascinating.....overcoming your misleading emotions and assumptions, yet not casting out the ones that may be helpful. It's a fine line to be sure. I think I'm going to devote a couple more columns to these ideas in the near future. In the meantime, we all have a little homework to do. I encourage everyone to print these questions out and put your answers on paper; I think it will be a big step towards better trading.