Here are two keys to tick off on your checklist on the way to becoming a better stock market investor.
Don’t just read the article but make sure that you act upon it.
Talk is cheap, right?
Keep a Trading Diary
Keeping a trading diary allows you to analyse exactly where you went right or wrong with your trade.
You should include information such as:
Name, and ticker, of the shares
Share price paid (or received)
Number of shares bought/(sold)
Total amount paid/received
Level of the appropriate market
The reasons for purchasing/(selling) the shares
Any forex levels
Details of the account the shares were traded in
Personally I find it handy to write the details of a share purchase on the top half of the page and the corresponding sale on the lower half of the same page.
I can then simply calculate my net profit, in monetary terms and percentage points, and any other calculations that I need for taxation purposes. When tax time comes around I have my figures ready real quick.
Keeping a trading diary also allows you to retrospectively see where you went right, or wrong, with a trade. When you see the figures and reasons in writing you will learn your investment lessons real quick.
The key to keeping a trading diary is to keep it consistent and if you manage to do that you will surely see your investment results improve.
Invest Only When It Counts
A large mistake that too many investors make is that they buy shares in companies that they only feel luke warm about.
In order to make big money on the markets follow these two points:
Invest only when the market in general has suffered a very large decline
Invest only when you are 100% sure that the underlying company is worth much more than what the share price capitalizes the company at
If you were to follow just those two rules your investment results would improve greatly.
Of course, being human has its flaws and us humans find it difficult to sit still and we are tempted to fiddle with things when they are running just perfectly.
During the interim prepare yourself financially and emotionally.
Open a special bank account just for holding your investment money.
Add money to this account with every pay cheque then when the markets fall for an extended period of time rely on your previous investment experience and ‘feel the fear but do it anyway’ to start purchasing shares.
When the market is trading near its bottom your downside is protected whilst in a fair value market your downside is substantially exposed.
Finally you should not attempt to time the market. Purchase your shares on a basis of valuation. When the time comes you will certainly know which price/value discrepancies will reward you handsomely.
The key is to find the strength to act upon this.