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Improve Your Investing Results
The Smart Profits Report: Issue #389
Wednesday, January 24, 2007
Improve Your Investing Results: Your 8-Step Checklist To More Successful Investing
By D.R. Barton, Jr.
Quantitative Analyst, Mt. Vernon Research
Here’s a question designed to change the way you trade…
Read the following question and then write down your answer immediately. Don’t overthink your answer - the important thing is that you capture the first thought that jumps into your head. And don’t read any further until you write down your answer!
What ONE thing would make a huge change to improve your investing results?
Now re-read your answer. I’m betting that it falls into one of two categories:
- Things I can do something about (items for which I accept responsibility)
- Things I blame on someone else
Want Results? Take Responsibility For Your Trades
One of the core principles that separates the top traders from the mediocre ones is the need to take responsibility for all their trading-related actions.
For example, if you wrote: “I need to upgrade my trading system. Do some research to simplify it and make it more robust,” that would fall into category one.
But if you wrote: “That stinkin’ system I bought isn’t worth the paper it’s written on - the developer is a bonehead. If he had half a brain cell, I’d be making some money,” this clearly falls into category two.
We must take responsibility for our own investment performance. And if you want to enjoy bigger, more consistent profits, this means making some real changes in the areas that matter most. So let’s spend some time today looking at the areas where some seemingly small changes and upgrades can make a big impact on profits.
Ask The Right Question… Get The Right Answer
The question above about improving your investing results is important for several reasons. First, it helps you to think about your current strategy, then challenges you to figure out what’s most important to you in your investment process.
In turn, this leads to other key questions:
- Is there just one thing I can do to make a big difference to improve my investing results… or several things?
- Did I know about it before? If so, what kept me from recognizing it and working on it?
- What are the obstacles to making that thing happen?
- Is the payoff worth the price I have to pay to get there?
Success coach Tony Robbins once said: “Quality questions create a quality life. Successful people ask better questions, and as a result, they get better answers.”
But if you’re stumped for answers, there are actually some simple (yet often forgotten) steps you can take to make your trades a lot smoother… and more profitable…
Your 8-Point Investing Results Improvement Checklist
When I ask investors and traders what one thing they could do to improve their investing success rate, here are some of the most important responses:
- Have a good exit strategy in case things go wrong
- Determine the best point to exit a trade profitably
- Stick to your trading strategy
- Use proper position sizing
- Adhere to your stop-loss points, no matter what
- Pay attention to every signal in their system or newsletter
- Find higher probability entry points
- Understand your personal trading psychology better
This “one thing” exercise is a simple one that can actually be beneficial in many other areas of your life, not just improving your investing results. Thinking about the one thing that could make a huge difference can challenge you to shake off the rust, or outdated ways of thinking.
Think about all of the times that you caught yourself doing low priority, low value tasks. What difference would it make if the next time you caught yourself in a lull or in a low-energy moment, you stopped what your were doing and worked on one key transformation that you could you make for yourself instead?
Great trading,
D. R. Barton, Jr.
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Today’s Smart Profits Cribsheet
- The fourth point in the checklist above talks of position sizing. I explain the importance of properly position sizing stocks in your portfolio and debunk the “classic” diversification scenario in Smart Profits #387, Position Sizing Stocks: Are You Losing Money On This Popular Investment Strategy?
- Looking for a new market trading system? I give tips on evaluating any new stock market index trading strategy that you may be considering in Smart Profits #380, Stock Market Index Trading Strategy: A 2-Step Approach To A Successful Trading System.
- Now that I’ve given you an idea of where to start when it comes to identifying that “one thing” that could lead to better investment success, I give you three more actionable tips that you can implement today to improve your trading. Get the details in Smart Profits #374, Stock Market Investing: 3 Things Investors Must Master To Improve Their Trading.
Related Articles:
- Trade Your Way To Financial Freedom: Reviewing The Holy Grail Of Investing
- Price Shock: How To Respond To Three Types Of Price Shock During Earnings Season
- Gasoline Prices: How To Win Big In The “Ethanol Decade”
The Chart Of The Week
Key ethanol 
distiller Archer-Daniels-Midland (NYSE: ADM) is already bouncing off of key support in anticipation from last night’s State Of The Union address from President Bush should prove to be a very bullish event for ethanol. This could be a good longer-term play with a stop set below January-February lows of last year.
