Trading Journal; The invaluable tool for traders

Trading Journal

We will start by listing a series of quotes from recent market updates. If you have not kept a trading journal, then while you read these excerpts, jot down what comes to your mind or try to visualize how you felt during the past few months, especially on down days. The geopolitical landscape has changed forever, and from now on, geopolitics will have at least a 30% impact on market action.

There is going to be no fixed formula that will work going forward. Why? The big players have so much money now that they delight in creating new narratives and generating new outcomes. Market Update December 27, 2021

This does not mean one cannot make money in the markets, and one can still determine optimum moments to go long or short using M.P. and Technical analysis. However, one needs to understand the difference between bottoming/topping action and timing the top or bottom. Timing the precise bottom or top is an act best reserved for fools.

M.P. is not based on a set formula. Mass Psychology analyses the erratic nature of this creature otherwise referred to as the human. Human beings are notorious for letting their emotions do the talking. When emotions do the talking, money flies out of one’s pocket and into the pocket of the top players. Instead of fighting the top players, ride on their coattails. Market update January 11, 2022

It appears likely that the market will experience two corrections this year. The first one, which could already be underway, is expected to occur in the 1st quarter. The 2ndone is more likely to occur towards the end of the 3rd quarter to the 4th quarter. Which crash ended the market? Which crash proved to be the end of everything? Ask that question to yourself the next time you panic. Every crash proved to be a tremendous long term buying opportunity. There is not one person alive or dead that can prove otherwise. Market update January 11, 2022

The anxiety gauge has moved into the hysteria zone, almost touching the extreme zone of madness; this happened only once in March 2020. Bullish sentiment is at an unheard level of 18. Right now, 82% of participants are either scared or sitting on the sidelines, waiting for a better tomorrow. Market Update January 24, 2022

The difference between an investor and a speculator (though most will deny being speculators) is that speculators monitor their portfolio daily and view 12 months as long term investing. Additionally, when the stocks they dreamed of purchasing pull back, they baulk and wait for even lower prices. Their lives are nothing but a never-ending loop of regret. If one examines their results over ten years, these chaps almost always severely underperform the markets. Long term investing is not based purely on timelines but on trends. If the trend is positive and the masses are in a state of disarray, pullbacks should be embraced. Market Update February 1, 2022

This week’s bearish sentiment hit a new multi-year high. So we have two revolutionary developments taking place within one week of each other. To top it off, experts are overreacting to the possibility of minor interest rate hikes, and the market is now trading in the extremely oversold ranges on the weekly charts. Suppose the markets experience another wave of selling next week. In that case, it could push the needle on the anxiety gauge even deeper into the madness zone than it did in 2020. Market update February 1, 2022

While we expect higher volatility this year, we also expect to accumulate many outstanding companies. In 24 months or less, individuals will be shocked at the gains some of these plays will produce. Remember, we got into GOOGL at 1300 and closed a position on a multi-billion dollar company for a profit of 75%. We expect similar opportunities and more over the next 24 months. Market update February 1, 2022

 

The Russel 2000 is filled with more speculative stocks, and it tends to top and bottom before the other indices. The selling is almost done as most speculators are undisciplined and have no staying power. The typical pattern for the MACD indicator is to swing from oversold to overbought ranges (bullish and bearish cycle). We refer to the above pattern as a triple bottom MACD formation. It never completed the normal cycle. Hence it is likely that the next bullish MACD crossover will lead to a strong upward move. Market update February 17, 2022

The MACDs are dangerously close to completing a bullish crossover on the weekly charts. This crossover takes time to complete, which suggests that the markets should rally for several weeks on completion.

Until the trend changes, the stronger the deviation from the norm, the better the buying opportunity. That is the end of the story. Market Update February 28, 2022

The best way to determine the onset of Operation massacre will be to monitor sentiment levels. If the masses are euphoric (extremely high bullish readings), it would indicate that the end is nigh. Market update March 9, 2022

On a separate note, the number of New 52 week highs refuse to take out their Jan-Feb lows, so we have yet another positive divergence signal. Market update March 9, 2022

The needle on the Anxiety gauge is now at the same level as it was during the peak of the covid crash; a striking development indeed. Market update March 9, 2022

Conclusion 

Now imagine one of the two following scenarios:

  1. You are a Tactical Investor subscriber, and while reading the above quotes, you can cross-reference those quotes with the trading notes you have in your Trading journal
  2. If you are not a T.I. subscriber, imagine how helpful it would have been to have access to notes from a trading journal that could provide you with precise insights into how you felt at any given point in time. You would have a clear picture of how you potentially allowed fear or joy to cloud your decision-making process.

Keep a trading journal; it will be your most valuable weapon in helping you become a better investor. Most individuals tend to gravitate towards the mass mindset, and this symptom tends to manifest itself during periods of extreme stress or volatility. Simply being aware of this process is enough to stop it, but it takes practice. The last few months would have been ideal for maintaining a trading journal.

 

 

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