Organizing Your Trading Plan

On last week’s Market Shrinkology program, @SnoopyJC asked a question about how to keep one’s trading plan well organized. If you go to minute 20 of the video linked above, you can watch my discussion of this.

I received a lot of feedback on this and many asked if I might elaborate and provide some examples as well.

To begin, a trading strategy is super critical. When you are entering trades, you ought to have a thesis, an objective and a discipline. When I say thesis, I mean a prepared and concrete rationale for entering the trade at the time and price you are getting involved. When I say objective, I mean a prepared profit takeing point again with both price and time in mind. Finally, when I say discipline, I mean a specific stop loss or maximum risk.

For me, writing this out in some form is critical. I keep this in a simple google doc and refine it over time.

Further, traders ought to be cautious to adjust these levels once the trade is on. Once you enter a trade, your psychology changes significantly which can affect decision making for the worse.

I am a minimalist and I use a very simple google spreadsheet that works great for me to track this information. The columns look like this:

Of course, it is up to every individual to choose to employ something like this or not.

Trading Journals

If you are a serious trader, then keeping a trading journal is simply critical. It is a way to organize your strategy and experiences over time and it becomes a reference over time to track your development.

At StockTwits, we’ve been extremly lucky to have Bella from @SMBCapital on StockTwitsTV. In October, he talked at length over the course of two programs about how he approaches journaling over time.

You can watch the first episode from October 11 here and the second from October 18 here.

In my opinion, these videos are critically important and better than anything I might write in this space. If you are serious about keeping a journal, watch these twice.

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