I love this time of year: vacation, family, drinks, parties, gifts, Santa, and the rest are all great. Almost equally I love this time of year because I am reminded to take time to reflect on the past year, which gives me an opportunity to map a game plan for the coming year. I feel like I am coming up for air and can look at the big picture once again.
Reviewing the Past Year
I make notes about every trade I make. In 2014 I generated more than 200 trade notes, and in the coming weeks I will be reviewing each and every one. About 80% will be tossed without another thought because they refer to standard trades that adhere to my strategy. The other 20% are more interesting—and instructive. I will dive deep into each of these trades, trying to figure out what went right and what went wrong. Each year I strive to fine-tune my trading, and keeping a trade log and reviewing it is one of the best practices a trader can have.
Preparing for the Year to Come
After reviewing the past year I start thinking about the year to come and make basic predictions about how the overall market is going to preform. As of this writing I think that in 2015 the S&P 500 will be up and might close out the year up by 5% (but not much more). Our bull market is starting to lose steam and price-to-earnings ratios are at their highs.
With some basic predictions in place I turn my consideration to bankroll management. As you know, probability-based trading requires discipline: you do not want to change your strategy often because doing so can skew your probabilities. That said, this is the time of year I reconsider my strategy and how I can tweak it to reduce risk and increase profits. How much capital do I want to risk in every trade? How much do I want to keep in cash? How much of my personal nontrading earnings do I want to add to my trading accounts?
If you read this far I am sure you want more details. What am I changing? What are my plans? Frankly, I don’t know yet because I am just getting started with my review, but I plan to share my findings and decisions in future posts.
What About Stockpeer?
I am really excited about the possibilities for Stockpeer.com in the coming year. Beyond blogging I hope to release several technical tools: How about an options backtester? A tool for picking the perfect brokers, anyone? Or real-time trade alerts? Lots of ideas and progress toward realizing them. Please share with me anything you want to see.
All work and no play makes Johnny very boring! Please, put down your laptops at some point and enjoy life for awhile. Relax and refresh your mind, body, and soul. Thanks to everyone for the early support of Stockpeer and happy holidays! Be safe and have fun.