Learn The Stock Market And How to Trade

 

Learn To Invest From Yourself

In a previous post about Pareto’s principle I alluded to the need to keep a investment plan.  I believe it is critical, particularly for new investors, to not only keep a plan, but a journal.  You have to force yourself to create a plan of why you invest/trade.  Without a plan you can’t have a baseline.  You can’t decide if a change to your base plan made things better or worse, you don’t have a firm foundation when you make a decision to invest or not to invest.  You are doomed to one of our worst indicators…your emotion, where your returns will boil down to luck.  Of course if you’re a luck person go for it, I am not.

My plan includes screening criteria to select my world of stocks to watch including macro TA issues and key fundamentals, short term TA for buying criteria, criteria on when to leave my investment (that was a hard learned lesson), portfolio allocation plans, personal finance distributions, how much I will spend on “out of the box ideas or trials”, and how much time I’m willing to spend work on my investments to balance family life and other obligations. 

I know this sounds like a lot, and it doesn’t have to be this detailed to begin, I just find it helpful and motivating, but I do recommend you do write down some rules.  Then review your rules:

• Should my rules be updated?
• Am I following them – why or why not? (If you have a a valid reason change the rules)
• Have you tested your rules?
• Have you tested your new ideas?
• Have you gone back and seen what would have happened had you followed or not followed your rules?

This type of discipline will bring forth a new type of professionalism and structure to your investing which helped me step up to the next level where I was no longer thrilled on an up day and sad on a down one, but methodically looking to improve.  This gives you the power.  Trust me, it’s a good feeling.

Anyways, grab a journal or laptop and start writing your rules.  You can share them if you like, but I’ve found for me I couldn’t follow someone else’s system if I wanted to and no one would likely be able to follow mine.  They are just too personal. 

Accountability

A sort of aside to this post I do like to put at least my general screened stocks up in front of the world to be scrutinized.  The occasional question about a certain stock or general ranking against the masses helps me not get too complacent.  You can view my Motley Fool CAPs stocks at www.fool.com my CAPs name is pintofool2

For those of you not interested in going here are some screen shots:

 

 

Anyways, I hope this helps and keep learning the market!

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