(RightLine) -- According to USA Today the average American spends seventy 24-hour days watching television each year. That's ten full weeks or 1,680 hours or 100,800 minutes in front of the tube - a major investment in time.
I wonder what would happen if we took just a tenth of those hours - the equivalent of four 40-hour work-weeks - to work on our stock trading skills?
Should you decide to follow such a "radical" strategy, here is a simple guide to help you along the pathway to trader enlightenment ...
"Six Steps To Transform a TV Zombie Into A Trading Wizard."
#1 - Draft a Trading Plan.
Include the details of how you . . .
- Choose the stocks to trade
- Determine your entry and exit points
- Select a time frame for each trade
- Calculate the number of shares for each position
- Control risk
- Manage your trades
#2 - Prepare a Trading Fire Drill.
Write down everything that might go wrong when you are trading. Then list the action you will take in response to each unexpected event. Review the Drill until you are sure that you know exactly what to do in each instance.
#3 - List Your Number One Trading Flaw.
Now, develop a plan of action to eliminate it. Once you are reasonably comfortable that you have it under control, move on to the next one. Be patient with yourself - this important process takes time. As you mature you will acquire new skills and widen your range of positive qualities. Make a permanent commitment to improvement.
#4 - Take Complete Responsibility For Everything.
No matter what happens, YOU are responsible - no exceptions. If your Internet connection goes down, or you lose electrical power, or your broker heads to Tijuana with your trading account, you still accept that you play a role in all situations. Blame no one, simply work toward a solution. Most traders are in self-denial about their actions. By taking full responsibility, you will quickly recognize and correct any hidden problems emanating from you.
#5 - Develop a Personal Wrap-Up Routine.
Depending on the time frame you usually trade, your wrap-up routine can be done daily or weekly, perhaps even monthly. At the end of each trading period, take a few moments to analyze your feelings. Did you stick with your plan? Then give yourself credit for doing a good job - even if you didn't make money. The more you become aware of how you feel, the less negative impact your feelings will have on your performance.
#6 - Measure Your Results.
Review your trading performance at least once a month. Become familiar with your exact Win/Loss Ratio and your Profit/Loss Ratio. To calculate the "Win" part of your Win/Loss Ratio simply divide the number of winners by the total number of trades you entered. Do the same with your losers to find the "Loss" side of the ratio. Your Profit/Loss Ratio is the amount of points - or dollars - in Profits compared to the amount of points or dollars in Losses.
For example, if you win $1.50 for every $1.00 lost, your Profit/Loss Ratio is 1.50/1.00. Also tally your trading commissions and other brokerage fees to determine how much it costs you to trade. Once you know your results, you can conclude how well your methods are working, and adjust your trading rule to improve performance if needed.