So 2022 is over. Did you get the stellar results you thought you would? The better question is, what did you trade right and what did you trade wrong?
The end of the year is the perfect time to do a post mortem of all your trades, and get an unbiased analysis of your results.
An often overlooked step in the trading process is the self-analysis of your trades, to identify your winners versus your losers. It can be a harsh eye-opening experience, but a necessary one to highlight weaknesses in your strategy and spot unfavorable patterns in your buys and sells. By highlighting where you went wrong, you can find and correct problem areas to improve your 2023 trading.
How To Invest: Where To Start Your Analysis
This is where you need to roll up your sleeves, dig in and analyze all your trades for the year. You can start by printing out the charts for the stocks you traded from IBD Charts or MarketSmith. Mark your entry and exit points on the charts. With each, check if followed your investing rules.
Was the stock market in an overall uptrend when you bought? You can check the front page of Investors.com under Today's Market to see IBD's current market outlook. We want to buy in a market uptrend, because roughly 75% of all stocks follow the general market trend, according to IBD research. In a correction, you should be scaling back or sitting on the sidelines until the investing environment improves.
Did you pick leading stocks in top industries? We are looking for the top one or two leaders in the top 40-ranked IBD industry groups, according to the CAN SLIM investing strategy.
We are also screening for superior or even accelerating quarterly and annual earnings growth, sales growth and a high return on equity. These key metrics can be found in the IBD Stock Checkup or MarketSmith.
How To Invest: Buy And Sell Rules
We are looking to buy when a stock is breaking out of a base pattern, or trading in another sound buy area on its chart, such as a rebound off the 10-week moving average.
Are you selling too quickly and taking a smaller gain, thereby giving up an opportunity for a larger profit? Or, are you holding your winners excessively long and giving back gains? When a stock gives back gains from a base breakout and comes back down to its buy point, it is called a round trip.
Or even worse, did you let a gain turn into a loss while you were hoping and waiting for it to climb back? By asking yourself these questions, you can check if you exited at the right time, maximizing profits. Also, congratulate yourself on your wins and having discipline the to follow your rules.
With an honest year-end evaluation, you can uncover any bad habits for a successful 2023.
