In trading, does practice make perfect?

It's been a while since my last post, but I have been extremely busy, as you'll soon find out.

The short answer to the question is: I don't know, but I sure hope so. Maybe not perfect, but more consistent.

I read somewhere a while ago about a former Redskins defensive football player (the name escapes me), and his thoughts about the NFL. He talked about games and practice and so on. When he first started playing, he always wondered/complained about why they practiced plays over and over and over again. It wasn't until later in his career that he fully understood why. The obvious answer is to be disciplined and get the play/scheme right. Make sure you are in the right spot, covering the right person, making the right tackle, etc. But the more important reason, is that during game speed, not only will you know instinctively how to make the play, but you will know how to REACT should the play or conditions change. You can recognize when things are not going according to plan, and with minimum thinking, adjust on the fly to make the play.

I think trading is similar to a certain degree. During trading hours, there is no timeout, no replays. You can't stop the clock to think. You have to react. This is where discipline and practice come in. There are many ways to practice in trading. The best way, especially when trying a new system, is to trade live with real money. Small money, but real nonetheless. Why? The emotions are there. Paper trading during market hours is the next best way to practice.

In my case, since I use eSignal, there are a couple of other ways to practice. I can download tick data for any symbol, and run the data in playback mode. This gives me scenarios where the chart sets up just like real time and the indicators give me the signals as necessary. Even more importantly, I can place dummy trades just like real time, and determine/refine my money management skills. It is as good as paper trading, but can be done at any time, and you can speed up the playback mode.

Personally, I have a pretty reliable system for my day trading. However it is very price sensitive, and while it works great in trending markets, I am finding that during choppy days, I get many false signals. For this reason, I have been spending a LOT of time optimizing, backtesting and practicing the tweaks/refinements to my system to the point where I feel more confident in its application under any market circumstances. Everytime I make any adjustments, I run eSignal in playback mode and take trades based on the indicators to see how well they work.

The point I am trying to make is that whatever system you use, it is necessary to backtest to make sure it gives proper and acceptable returns. Additionally, it is also important to know/practice how the system acts in real time, and even more importantly, how YOU should react if the system does not go according to plan. Backtesting gives you numbers and percentages which is good. But you actually taking the trades based on your system - now that's the key.

I will have another post soon to discuss in more detail what some of these tweaks are, and how my trading has been affected.

Learing never stops as a trader. I have been day trading for about a year, and have spent countless hours thinking over, analyzing, optimizing, you-name-it-izing my trades, system, risk/reward, etc. I have spent almost every spare hour of my time doing this. And while I will never be able to make if perfect, I should be able to become a more 'consistent' trader. THAT is my ultimate goal.

Good luck with your trading.