Stock Market Resolutions

It is about this time of the year that most of us have already broken our New Year's Resolutions. The good news is that it is never too late to get back on track.

In my experience, the very best way to make sure you stick to whatever resolutions you have previously set for yourself is to 1) make sure someone holds you accountable for making change and 2) that your resolutions are both specific and measurable.

Accountability: If your resolution is to lose weight this year and become more healthy (a good resolution for all), studies have proven that if you don't involve others into your resolution and commitment toward change the likelihood of your success is greatly diminished. In fact, that's the main reason (other than education on simple nutrition) why people have found progress though support groups like Weight Watchers. The built-in support system encourages people to make changes in their life even when they find themselves falling back to the same old habits and routines. When they revert back to the old habits, having others hold you accountable and providing encouragement to get back on the right track has proven to be useful.

Specific & Measurable Goals: The more specific you can make your resolution the better. This was something I realized quite a lot from reading through the stock market resolutions submitted by members. For example, a resolution that is "to do a lot better than I did in 2007" or "make more money" or "have more discipline" or "be less emotional" (all of which were submitted) is not as good as specific resolutions like "reduce the number of investments I hold to 10 of my very best ideas" or "read 6 trading books" or develop a specific trading plan for the next six months and stick to it" or "turn the tv during market hours." The more specific and narrow you can make the resolution, especially in terms of how you measure your level of success over a period of time, the better.

Remember, it is all about making small steps every today for big results later. In fact, some of the smallest changes can make a huge difference in your results. A simple change like "I will write down three basic reasons before I buy and at the same time I will identify a specific exit point if I'm wrong on every trade I make" can often make a world of difference.

Unfortunately, trading and investing is often a solitary endeavor where it is often a challenge to not only set specific and well-defined goals (other than bottom line performance measurements) but also it is difficult to build in accountability. However, it still can be done. For many of us, this requires using a trading journal where we set our specific and measurable goals and then build in routine checkpoints to make sure that those goals are being achieved by specific dates.

For example, a very big change I've made this year is to rework the way I manage and allocate my time as I explained in this letter to readers. For example, in 2007 I spent an average of 17 hours per week in just answering email. So far in January, I'm averaging about two hours per week and I don't answer email during trading hours unless it is an absolute emergency. I'm holding myself accountable by continuing to keep track of the time I spend working and by making it more difficult for me to access my email. For example, I eliminated my email software from my trading computer, so I have to power up my laptop to retrieve my email. That extra layer of nuisance has allowed me to break my constant bad habit of checking email throughout the day when I should be concentrating my focus on other things. As for accountability, I've also set specific goals for using that extra time. The 15 hours per week no longer spent on email is being used for stock screening, research, and trading. And, while it has only been a month, I've already begun to see small signs that my focus is helping even though this has been one challenging month. To say the least, if you've set resolutions for yourself heading into 2008, I suspect that you've had difficulty sticking with those changes. I know I sure have. In times of market stress, it is very easy to lose discipline and focus no matter how determined you may be.

With all of that said, I still thought you may find how others responded to the following question in the annual membership survey: "If you had to make a New Year's resolution for yourself in trading or investing, what would it be?"

• Think for myself

• Stay focused on the reasons why I bought a stock and sell when those reasons are no longer compelling

• Don't let successful trades turn into losses

• Be ruled less by emotion and fear and more by logic and knowledge

• To avoid being whipsawed, I will give myself more room for the trade to work

• Follow my own rules

• Be easier on myself when I screw up and don't let my ego inflate when I'm right

• Don't force trades - there will always be another opportunity

• Honor thy stops!

• Stop chasing hot and popular stocks

• Do my own research

• Keep learning

• Learn to be less nervous and take more risks

• Remember that lost opportunity is better than lost capital

• Trade less - don't overtrade

• To try and limit the number of opinions I allow to affect my trading. Paralysis by analysis has hurt me

• Avoid any trade where I use the word "hope" in my reasoning process

• To follow my logical, well-conceived, long-term game plan, without making irrational changes due to short-term market conditions

• Tune out the daily noise and useless banter

• Reduce the number of positions currently held

• Have more faith in my own abilities

• In trading, learn to be fearless

• Don't be too greedy

• Slow down!

• Incorporate the use of smart trailing stops

• Use ETFs to properly diversify

• Remove my ego from my trading decisions

• Avoid getting easily frustrated or impatient

• Control and limit my losses

• Focus on making the next trade, instead of the last one

• I will not average down into losing positions

• Create more careful and detailed records with a commitment to review them regularly

• Learn to incorporate a systematic screening method like you

• Use emotions (both personal and market) to my own advantage

• Know my exits before making any trade

• Don't be swayed by the latest and greatest strategy I hear about

• Keep it simple. Complex strategies are no better

• Avoid crowded trades

• Take time to look for reasons NOT to buy

• Let profits run longer. take losses quicker

• Trade what I see, not what I want to see

• Be more proactive and react faster to situations I find

• Make bigger, but less frequent trades

• Stay patient

• Focus on value of companies and not on the temporary market emotions

• Set small goals that will achieve my big goals over the long-term

• Be more nimble

• Keep better notes

• Adopt an opportunistic versus a rigid bull or bear bias toward the market

• Enjoy the game more

• To quit counting the value of my account on a daily basis

• Stop looking for the holy grail

• Figure out what trade related information to consume on a daily basis and keep what is useful and leave out that which is not

• Avoid information overload by limiting what I read

• Don't read stock blogs

• Turn off the TV and dedicate more of my time to become a better trader

• Set up a lazy portfolio

• Focus on proper asset allocation

• Never forget that "when you are through learning you are through"

• Recognize mistakes early, exit, and move on

• Take partial profits routinely, but keep money on high-performing stocks

• Follow my system

• To screen & scan my watchlist in a consistent manner each and every time

• Take routine breaks away from the market to refresh and gain more perspective

• Add more fundamental research to my technical research

• Concentrate on finding just one really good idea per year like Warren Buffett

• Stop searching for shortcuts or quick fixes - take baby steps

• Read at least 6 trading books in 2008

• Focus, focus, focus - ignore all outside distractions

• When a strategy works, have the courage to follow it through, when it does not work, to have the wisdom to stop trading

• Find and exploit long-range sector themes

• Open my ears and keep my mouth shut

• Never panic

• Be humble

Those of you who submitted these should ask yourself three main questions: 1) are these resolutions specific enough, 2) will they help me reach some measurable goal, and 3) how will I build in some level of accountability to make sure I stay on the right track? For those of you who haven't set resolutions/goals for yourself this year, we have 11 more months of 2008.

What do you want to achieve this year?