Monday, January 19, 2009 1:44:39 PM
Posted by: Chartinator Date: Sunday, January 18, 2009 8:52:32 AM
In reply to: None Post # of 10907 [Send a link via email]
Post-Analysis Serves As A Teaching Tool
BY ALAN R. ELLIOTT
Posted 1/16/2009
The new year is well under way and, if you don't already do it, it's a good time to resolve yourself to starting a review of your stock trades.
What's the point?
A review, or post-analysis, acts as a learning tool in which you study your trades and see how each one worked, or didn't work.
It also helps clarify your thinking: What did I like about this stock? What were my targets? Did I see the risks going in? It should help you correct bad trading behaviors.
A review also lets you detail your strategy as you add shares of a stock.
It's smart to keep a journal of all your trades, and use it as the basis for your post-analysis.
Game Tapes
Going back to review your trading log once or twice a year is a lot like golfers studying films of their swing. It is a means of adjusting and improving their technique.
The first trick to analyzing your trades is to provide yourself information.
The best way to do this is to print out a chart of each stock and use it as your journal. Record a stock's fundamental and technical strengths.
Jot down the stock's base pattern and how you identified your buy point.
Note your price targets and sell situations.
If you deliberated and decided to hold a stock rather than sell it, write down your reasoning. When you sell, report why and when, and say what triggered the move.
The clearer and more organized you are in your research and decision-making going into a trade, the easier it is to analyze that trade after the fact. Armed with this data, your post-analysis has the firepower to do some real good.
2008 was a tough year for even the best investors. Warren Buffett, T. Boone Pickens, Carl Icahn and casino mogul Sheldon Adelson saw their investments get hammered.
Many investors sat out a large portion of the year's dicey market.
But even if you only made a few trades, you can learn from a quick review. Don't take too much time and overanalyze.
But compare your best wins and look for similarities. Do the same with your losses, trying to figure out common faults in your trades.
Are there stocks you sold too soon, that went on to make big gains? If there was more than one, are there any similarities? What spurred you to sell?
View larger image
Remember, each stock is unique, and each buying decision has its own factors.
But the more you invest in understanding your own abilities to find, research and time your trades, the more profitable your skills will become.
Be Honest With Yourself
Be sure to be self-critical in your evaluations, or you may not get much out of the exercise.
If you strayed from proper buy and sell rules, be sure to mark yourself down for that.
For example, you may have bought a stock when the general market was in a correction. That immediately puts the odds against you.
Also note if you bought a stock that didn't measure up much in terms of being a market leader.
For each bad move you made, calculate how much money you would have saved if you had avoided the mistake. The sum may be the most persuasive teacher.
In reply to: None Post # of 10907 [Send a link via email]
Post-Analysis Serves As A Teaching Tool
BY ALAN R. ELLIOTT
Posted 1/16/2009
The new year is well under way and, if you don't already do it, it's a good time to resolve yourself to starting a review of your stock trades.
What's the point?
A review, or post-analysis, acts as a learning tool in which you study your trades and see how each one worked, or didn't work.
It also helps clarify your thinking: What did I like about this stock? What were my targets? Did I see the risks going in? It should help you correct bad trading behaviors.
A review also lets you detail your strategy as you add shares of a stock.
It's smart to keep a journal of all your trades, and use it as the basis for your post-analysis.
Game Tapes
Going back to review your trading log once or twice a year is a lot like golfers studying films of their swing. It is a means of adjusting and improving their technique.
The first trick to analyzing your trades is to provide yourself information.
The best way to do this is to print out a chart of each stock and use it as your journal. Record a stock's fundamental and technical strengths.
Jot down the stock's base pattern and how you identified your buy point.
Note your price targets and sell situations.
If you deliberated and decided to hold a stock rather than sell it, write down your reasoning. When you sell, report why and when, and say what triggered the move.
The clearer and more organized you are in your research and decision-making going into a trade, the easier it is to analyze that trade after the fact. Armed with this data, your post-analysis has the firepower to do some real good.
2008 was a tough year for even the best investors. Warren Buffett, T. Boone Pickens, Carl Icahn and casino mogul Sheldon Adelson saw their investments get hammered.
Many investors sat out a large portion of the year's dicey market.
But even if you only made a few trades, you can learn from a quick review. Don't take too much time and overanalyze.
But compare your best wins and look for similarities. Do the same with your losses, trying to figure out common faults in your trades.
Are there stocks you sold too soon, that went on to make big gains? If there was more than one, are there any similarities? What spurred you to sell?
View larger image
Remember, each stock is unique, and each buying decision has its own factors.
But the more you invest in understanding your own abilities to find, research and time your trades, the more profitable your skills will become.
Be Honest With Yourself
Be sure to be self-critical in your evaluations, or you may not get much out of the exercise.
If you strayed from proper buy and sell rules, be sure to mark yourself down for that.
For example, you may have bought a stock when the general market was in a correction. That immediately puts the odds against you.
Also note if you bought a stock that didn't measure up much in terms of being a market leader.
For each bad move you made, calculate how much money you would have saved if you had avoided the mistake. The sum may be the most persuasive teacher.
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