Thursday, December 31, 2009

The Most Important Trading Goal for the New Year

As we come to the end of 2009 and a holiday weekend, it's a great time to reflect on trading performance for the past year and goals for 2010.

Without ways of tracking and reviewing performance in real time, however, trading goals for the year aren't much more likely to have force than other well-intended (but quickly forgotten) new year's resolutions.

Where are you making money? What is causing you to lose money? What are the market ideas and conditions where you should be taking more risk? What are the situations in which you should be containing risk, or perhaps standing aside altogether? How much heat do you typically take on trades, and how can you execute your ideas better to reduce drawdowns within the trade? How do your winning and losing trades clump together over time, and how much of the clumping is due to psychological influences? How much is due to market conditions?

You can't get the answers if you don't ask the questions, and you can't get the answers if you don't have ways of tracking what you're doing.

I see where StockTickr is offering a basic version of their journaling and performance software free of charge. They're also offering a free trial for their pro version that tracks risk and performance metrics and that links to Trade Ideas and the Trade Ideas odds maker module. This latter functionality creates a very nice suite of tools for generating, executing, and tracking the outcomes of your ideas.

Performance improvement starts with measurement, whether you're performing in track and field events, racecar driving, or weightlifting. To know what you are doing well so that you can do more of it; to know what you're doing poorly, so that you can avoid it: that's not such a bad goal for the new year.



Jaime said...

Indeed Dr. Brett,
Documenting both thought and market information has helped me tremendously.
I have been making some improvements to my Stock Trade Journal Application and would like input from traders. I have added a trade planning grid as well as basic trade statistics and better graphs.
A list of all transactions for a given time frame can be exported to excel and trades can be searched and sorted by symbol.
For all traders interested, please download my free trial application. If you email me(contact page) your suggestions, comments and input about layout or functionality, I will send you a key to unlock it and updates free of charge.
Thank you very much in advance.

Steve Willette said...

Brett, thank you again for you insights on trading. Wishing you and your family a happy New Year!
I agree that reviewing your journal entries over the past year can give you a good perspective of your past performance, good or bad, and help you prepare for the new year. Unfortunately, I wish I had included more detailed notes per trade like you suggest in your book, The Daily Trading Coach (Situation, Self Talk, Consequences, and Coaching Talk).
I have since incorporated them into my journal and will try to be more committed in documenting the details of my trades in the new year. Steve