Americans love football. I love football. 16 regular season games then playoffs; who doesn’t love it when Sunday comes around during football season?
What amazes me is how honed in and laser focused the players, coaching staff, trainers, etc are on game day. Each week’s game is treated as the biggest game of the year because they know to make the playoffs and have a shot at a title requires giving it their all.
While we love watching 60 minutes of game time spread over several hours, what we don’t see is the work going on behind the scenes.
Endless hours of practice each day during the week, followed by a grueling game with coaches analyzing and calling plays from high above the playing field, then several days reviewing the film to correct mistakes and set the focus for practice the next week.
Rinse and repeat.
If you think about it, trading is a lot like football for most investors.
Scenario A – Active Trader – Read any stock newsletters, research reports, and STTG market recap at night, wake up and check the pre hours and general market news in the morning, prep your trading computer, market opens and you trade with real-time charting, quotes, etc, then the market closes, confirm no after hours drama, eat dinner, then hop back on comp, read any stock newsletters…
Scenario B – Hobby Investor – Wake up, exercise, go to work, check quotes and adjust any orders during lunch break, check quotes at close, go home, eat dinner with family, put kids to bed, watch tv with wife, read STTG market recap and any other subscription research then go to sleep.
Rinse and repeat Monday – Friday right?
I’ve discovered there is something big missing from this routine 99% of us partake in.
Actually, this is something so critical that I realized I would never experience true out-performance until I made it a part of my daily routine.
The key I was missing is something that pro football teams dedicate 20% of their time, if not more to each week.
That activity? Reviewing the film, or more specifically what I call post trade analysis.
Phases of Trade Analysis
Pre Game – Preparing for the trade.
Everything that goes into finding and narrowing to the eventual trade is part of your pre game analysis. Thus, market newsletters, stock pick services, research reports, screeners, and the like are all part of this phase.
In Game – Buying, monitoring, selling.
Everything that your online broker offers makes up the in game experience. Real-time quotes, streaming stock charts, performing technical analysis, placing market, limit, and stop loss orders, trade alerts, and quality executions are all examples.
Post Game – Reviewing the film.
Reviewing the film is critical part of professional sports, and investing is no different. Taking a screenshot of the stock chart after the trade is completed, plotting buy and sell points, writing down your notes recapping the trade, and tweaking trade rules thereafter are fall under the post game.
Post Game (Trade) Analysis Breakdown
Arguably the most important part of the investing is taking the time to figure out what went right, what went wrong, and process thereafter. There is simply no better way to improve over time.
From my Investors Guide to Post Trade Analysis I highlighted four steps to a proper recap:
- Log the trade details – ticker, date, buy $, shares, sell $, return $, return % (at a minimum) – in your excel doc or other trade log. Other great data points to track include stop price, risk, and commission spend, among others.
- Download a chart of the stock – mark it up with buy and sell points alongside any trendlines, support, resistance, etc. Then, mark this chart with the trade info and archive it.
- Write your trade notes – either on the chart itself, in your excel journal, or on paper, write down what you did right, wrong, and overall recap the trade in your own words. Note the trade ID for easy access later.
- Reflect back on trade data, chart, notes – this is the true “reviewing the film” exercise. use the information to take a outsiders view and identify potential bad habits, make rule tweaks, identify areas for improvement, and overall set the focus for the next trade.
Now, I know what you are thinking. “Blain, I am busy, I don’t have time to do all of this.”
I get it.
Not everyone knows how to create a custom excel spreadsheet, or likes to journal on paper, or knows how to markup charts and organize them by trade, calculate profitability and return against the market, etc.
The goal of this article is to simply reveal two points:
Point #1 The truth is that there is a huge opportunity for you. You can improve your success rate, and ultimately make more money from your investing if you put in the time to conduct post-trade analysis.
For those of you that already do this, fantastic, keep it up, email me and let me know any tricks you’ve learned along the way.
Point #2 I am so passionate about this because of the positive impact post-trade analysis has had on me that I am on a quest to make it a no-brainer part of every investor’s daily routine.
That is why I created the StockTradingToGo Trade Journal back in 2013 and many StockTradingToGo users love it. In fact, as of October 2014 Version 2.0 is the latest version and we are really excited how it turned out.