Phil Pearlman

We’ve begun a program called Talk Your Book on StockTwitsTV where our community members send in 140second or less videos in which they provide a rationale for a position they hold in the market.  It has been awesome so far.  This most recent episode features @JudPyle, @DownTownTrader and @TraderStwie.

You can watch it HERE.

(If you have questions or would like to contribute, you can send me a file, a link, whatever between Tuesday morning and Thursday 1:30pm @ phil at stocktwits dot com)

On last week’s Market Shrinkology program, @SnoopyJC asked a question about how to keep one’s trading plan well organized.  If you go to minute 20 of the video linked above, you can watch my discussion of this.

I received a lot of feedback on this and many asked if I might elaborate and provide some examples as well.

To begin, a trading strategy is super critical.  When you are entering trades, you ought to have a thesis, an objective and a discipline.  When I say thesis, I mean a prepared and concrete rationale for entering the trade at the time and price you are getting involved.  When I say objective, I mean a prepared profit takeing point again with both price and time in mind.  Finally, when I say discipline, I mean a specific stop loss or maximum risk.

For me, writing this out in some form is critical.  I keep this in a simple google doc and refine it over time.

Further, traders ought to be cautious to adjust these levels once the trade is on.  Once you enter a trade, your psychology changes significantly which can affect decision making for the worse.

I am a minimalist and I use a very simple google spreadsheet that works great for me to track this information.  The columns look like this:

Of course, it is up to every individual to choose to employ something like this or not.

Trading Journals

If you are a serious trader, then keeping a trading journal is simply critical. It is a way to organize your strategy and experiences over time and it becomes a reference over time to track your development.

At StockTwits, we’ve been extremly lucky to have Bella from @SMBCapital on StockTwitsTV.  In October, he talked at length over the course of two programs about how he approaches journaling over time.

You can watch the first episode from October 11 here and the second from October 18 here.

In my opinion, these videos are critically important and better than anything I might write in this space. If you are serious about keeping a journal, watch these twice.

Last Tuesday night on StockTwits.TV, I began broadcasting a program called Market Shrinkology in which I examine a broad range of topics related to the psychology of markets.

I am really excited about this because it allows me an additional medium in which to more closely connect with the StockTwits community and my hunch is that we might all learn a little something in the process.

Tonight at 9:30pm Eastern, I will air the second program and wanted to take a bit of time to discuss one of the program’s topics beforehand.

Structuring Episodic Memory

Memory is a funny thing.  There are salient events which might have occurred years ago that we recall as if they happened yesterday and things that happened yesterday that we are unable to recall at all.

In important ways, episodic memory and emotion are closely linked. This is why i remember breaking my leg when I was four (it was very scary) but can not remember what I had for lunch 2 days ago.

As well, memory is closely linked to how we learn.  I learned a lot that day i was four and broke my leg and never again jumped from the roof of the shed. :)

Building the Best Trading Memories

So how can we use these tidbits about memory to improve our trading?

There are instances in every trader’s career in which he/she has well executed trades.  I am not necessarily talking about the biggest winners.  I am instead talking about trades where the trader did everything just right and according to plan and either made money or limited loss.

Some have these experiences every day. For others, the well executed trade is more elusive.

The exercise I will walk you through tonight will help you create vivid and lasting memories around well executed trade experiences.  The goal is that by amplifying the experience, you will remember them better and allow them to more readily influence your future behavior.