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Trade School: If It Can't Be Measured, It Can't Be Managed

The whole measured/managed thing comes from the work of Peter Drucker, one of the most important business writers extant.  It rings true almost universally.  We get a reminder to do some measurement of how we traded this year courtesy of the Attitrade blog today…

It’s extremely easy to run some numbers on the exported data from your brokerage account. See if you can figure out the “sweet spot” for holding periods or whether you make more on the long or short side. Information gleaned from your trading data can be priceless.

As we all know, the market changes and thus our strategies and systems adapt to accommodate. Here’s where you can truly learn from your trade history. Compare this years’ data with prior years’ data and see how the changes have worked over longer periods of time. This type of research is referred to as drift.

As an example, when a pizza company wants to improve their pizza they methodically change sauce, crust, toppings, etc (market approach). They run taste tests (metrics) along the way to see if the changes made were better or worse. As they moved from pizza 1 to pizza 2 to pizza 3 they collect the data on the small and barely noticeable changes made. When they arrived at an acceptable iteration, and this is key, they would compare it with the original pizza.

Don’t miss the rest of this post or the opportunity to measure and tweek your results from this year.  If you’re not measuring both successes and failures, how on earth can you manage your portfolio or trading account?  This is elemental stuff.

Source:

Trade Metrics and Drift (Attitrade)

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