There is a term that is coming up in the stock market circles known as trading planing. It means very simply, “planning for trading.” I have always been the first one to call my trading planing an important part of my trading. It is the first thing I do before every trade and it is something I continue to work on day in and day out.
If you don’t know what trading planing is, let me explain. Most people that are serious about trading planing understand that they need to have a trading plan that is developed before they even think about trading. They understand that they need to think about the big picture, what to invest in, when to invest and why. But a lot of new traders do not have this kind of discipline or mindset.
So what I suggest is that you make trading planing part of your daily routine. It does not matter if you do it once a week or once a day, trading planing is vitally important to your long-term trading success. I use trading planing on a daily basis and am getting better at it.
What kind of trading planing activity should you engage in? The answer is simple, anything that gives you time to think about what you want to invest in, when to invest and why. For instance, one of the things that I do is write down a list of stocks that I want to invest in based on a certain criteria (for example, the P/E ratio). Then one day, when I get into my trading, I can look at the list and make trading decisions based on how good the company is doing financially.
Another one of my favorite ways to plan is to figure out what my personal risk tolerance is. That is, what I am willing to take when I lose money. For example, if I’m trying to make long term investments and have the means to absorb large losses, I would rather stay in those funds than move them to another safer fund. So I try to think of investment categories like that one. Also, I will set a goal for how much money I want to make in one year.
You may think that I don’t need one, since I make most of my money trading penny stocks. But there are lots of ways to minimize risk and increase your odds of making money. Some people will be trading day trading all the time, while others will trade more during the week. You can also make better trades based on technical analysis. It’s all up to you and what you think will work best for you.