By Shaun J., Sr. Traveling Stockbroker and Guest Blogger
So you’re feeling really good about your last trade. You’ve just increased your portfolio by 25 percent and you are beginning to think you have this whole trading thing figured out. Your confidence now has you scouring the stock market in search of your next big move. Your last trade was unplanned, but wouldn’t it be nice to gain another 25 percent to close out the day? So you place another trade and, to your dissapointment, the new trade erases your gains, and then some.
Unfortunately, I’ve made some woeful trades like that. Who hasn’t? But, I discovered along the way that keeping detailed records of my trading activity can be helpful in potentially combatting those rash decisions.
Keeping trading records or a trading journal gives you a closer look into your strategy and helps you better understand your trading behavior and habits. While this type of bookkeeping is not a glamorous task, it is arguably as imortant as finding your next investment. Documenting your peformance can reveal:
- The cost effectiveness of your strategy
- Transparency in your decision making
- Patterns in your trading
What to Document When Trading and Investing Online
Being a trader myself, I want to recommend a few items you may want to record when trading. Keep in mind that we may not have the same trading styles, so consider creating a system that’s best for your objectives.
- Average time per trade – Documenting your trade speed, along with how long you hold your investments can help you rationalize your trade efficiency and holding period.
- Entry and exit points – By recording the time, date and price of your entry and exit points you can evaluate your trade executions in comparison to the day’s trading highs and your risk-to-reward ratio.
- News or events – Jotting down the financial news or events that took place at the time of your trade can help you understand possible reasons behind a sharp spike or decline.
- Why you made your trade and the outcome – (Example: This stock showed signs of emerging out of a cyclical downturn so I bought 100 shares). Recording the outcome can enable you to review the success or failure of your trade. From there, you can focus more on what worked and try to avoid things that may adversly affect future trades.
- Gains and losses – Consider documenting whether or not your expecations were met with a trade or an investment, along with what may have impacted your overall return, including dividends or margin interest.
Helpful Ways to Document Your Online Trading
Don’t forget there are ways you can conveniently export your transaction history into a Microsoft Excel spreadsheet from your trading platform, which may make your recordkeeping easier. And, for those of you who use Scottrader® Streaming Quotes there is a handy notes field that allows you to record comments on stocks that you own or are watching. It might be a feature you want to explore using.
What other details of your trading activity would you recommend recording?
Also of Interest:
Shaun J. has been with Scottrade since 2007 and works as a traveling stockbroker.