Upgrade to Stocktickr Pro here to get access to the Stocktickr Trading Journal (it’s less than the cost of a single trade per month!)
Stocktickr Pro subscribers get access to one of the most powerful trading tools for short term and long term investors alike: a trading journal. Why is using a trading journal so beneficial? It helps you use better money management. Successful traders realize that a good money management strategy is the way to consistent profits in the market. Ironically, many traders agree that money management is the most important but least understood trading concept.
A good money management strategy answers the question: Given the amount of my total portfolio, how much should I invest in a single stock? The answer lies with how much you’re willing to risk on each position. By “risk” we mean the most you’re willing to let your position go against you before you bail out.
In other words, your risk is the distance between your buy point and your stop loss as a percentage of your entire portfolio. This distance is commonly referred to as R. Your goal as a trader should be to make profits in large multiples of R. That is, find trades where you can make your risk (R) very small in proportion to the potential profit. Traders use a term called “Expectancy” or profit in terms of your initial risk to evaluate their trading.
What should your risk be in each trade as a percentage of your entire portfolio? Many great traders seem to settle on a value of 1%. That is, when you enter a trade you should size your position (the number of shares to buy or sell) so that your risk amounts to 1% of the value of your entire portfolio. If you risk too much, the drawdowns you’ll experience will be too much. Risk too little and you won’t optimally capitalize on your winners.
Defining your risk before you enter a trade also defines your worst case scenario. This is very important in stock trading and a step that many investors overlook. How many individual investors lost money in the dot-bomb era stock market dive? How much more value would their portfolios have if they defined their risk beforehand and bailed out of trades that went against them?
The Stocktickr Trading Journal is a simple tool for helping you calculate position sizing and risk as you enter trades. When you click the “Show Trading Journal” button, the journal appears with intelligent default values that save you time. As you adjust your stop loss, the other fields such as R value, adjust automatically giving you a quick view of the risk/reward potential of a trade.
You can adjust your default R value and default position percentage to suit your type of trading. For example, if you’re comfortable risking 2% of your portfolio on each position, you can change your default R value in your profile to 2 and when you go to the journal for a trade, your default values will be customized for your style.
After you enter trades in your journal, there are a ton of reports you can use to slice and dice your trading and find out what’s working better or worse for you. You can view Expectancy by Tag, Expectancy by Trade Duration, Expectancy by Trade Type (long or short), and much more.
Investors have a tendency to announce good trades from the mountain top and sweep their bad trades under the rug. The Stocktickr Trading Journal helps you honestly evaluate your trading and keep you in the game.
Upgrade to Stocktickr Pro here to get access to the Stocktickr Trading Journal (it’s less than the cost of a single trade per month!)
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