With the new year arriving, it's a good time to evaluate your trading performance and be better prepared to invest in 2024. Did you reach or exceed your trading goals or did you fall short? The only way to answer that is to dig into your trades to learn what you did right and wrong.
Doing a year-end post analysis is an objective way to analyze your trades and strategies and correct any bad habits so you don't repeat them in the new year. If you have the mental fortitude to face your shortfalls and revisit expensive mistakes, you'll become more aware of your bad tendencies.
But a post-analysis is also a time to see what worked and to celebrate your winners.
Did you make profits because of your disciplined strategies, or did you simply ride the wave as the stock market rallied?
How To Invest: Mark Up Charts
Start by printing out charts of all your 2023 stock trades using IBD Charts or MarketSmith. Mark your buy and sell points on each chart. Did you follow your investing rules? Do you even have rules? Write down any factors that led to your buy and sell decisions, such as profit performance or industry leadership.
Make a methodical study for each case. Was the stock market in an uptrend when you purchased? We want market momentum on our side, because generally 75% of all stocks follow the stock market trend, according to IBD research.
You can find IBD's recommended market exposure based on our newly revised five-tiered scale on the homepage of Investors.com. Remember, in a low-exposure market, it's best to take profits and wait for conditions to improve.
Ask yourself some important questions:
Were your stock picks from the top 40 IBD industry groups? It's best to look for the top one or two stocks in a highly-ranked industry group. The IBD Stock Checkup helps you make a quick analysis.
How To Invest: Analyze Your Buys, Sells
Did you buy stocks breaking out of a proper base or alternate buy point, such as a bounce off the 10-week moving average, a three-weeks-tight pattern or a trendline breakout? Buying right is often half the investing battle.
Did you follow proper risk management and cut your losses at 7% if the trades turned south? Or did you get out too early and leave profits on the table?
Did you take some profits on the way up, for example when many stocks got extended in the November-December rally? You should have taken at least some profits when gains from proper buy points reached 20% or 25%.
And did you hold stocks too long and give back profits — or even worse, all your gains in a round trip?
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
