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Time For Your Annual Review


As we head down the stretch into the final four weeks of the year, set aside some time to study your trading.


It's hard to believe we are embarking on the final month of yet another year that will soon be in the books forever. As a trader I always find the annual reset to be quite significant because it allows me to reflect on the previous 12 months evaluating my trading and honing in on areas that need improvement.

For those who desire to be great traders and consistently remove money from the market, I don't believe it is enough to simply review the profit and loss, making mental notes about how next year will hopefully be better, rather I suggest that an individual take the time necessary to go through each and every trade, studying where mistakes were made and recognizing which trades made the most money. It is only through this time-consuming process that patterns will emerge and a trader will quickly start to realize areas of strength that should be focused on, and common mistakes that should be eliminated.

This year has been particularly tricky as the S&P sits in negative territory since April 30th, with the NASDAQ up only 2% since the end of May, which means psychologically a trader may feel as though he has been trading against the grain for the last several months, which makes a great deal of sense. Regardless of the relative benchmarks however, a trader should still take the time to do a personal assessment and run through all their activity to assist them going forward.

The following are some tips to follow as you pursue your own personal trading assessment:

1) Go through every trade start to finish: It isn't enough just to review a trades final P&L rather review the entire trade. I find it most helpful to use a charting software such as TeleChart, which allows me to pull up the chart on the particular days of interest so I can see again what the stock was doing and recall what my motivation was for my action.

2) Entry: Recall, review and assess why you entered the stock in the first place. Looking back, was the purchase planned? Do you recall what your strategy was?

3) Mr. Market: Once you review the entry, review what the general market was doing at that time. Was the trend in your favor? Were you fighting the tape? Was it a day when the market was moving and sucking you into a buy?

4) Exit: Review the exit of the trade and your reasoning for doing so. Does it follow a set strategy? Did you sell the stock too soon, too late or just in time? Were you stopped out? Were you shaken out?

Over the years as I pursue this exercise, I always find that one or two major themes make themselves known of which I must resolve to alter. I believe that if I can take away one new rule or eliminate one bad habit it is time very well spent.

As we head down the stretch into the final four weeks of the year, in addition to all your Holiday plans, set aside some time to study your trading. The time invested in evaluating the past will directly correlate with the investment success you achieve in the year ahead.

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