Successful Traders Handbook

1

TABLE OF CONTENTS

Page

Introduction

3

Habits of Successful Traders

5

Developing the Right Mindset for Trading

9

Devel veloping a Daily, Weekly and Mon Monthly hly Rout outine

13

Documenting Your Trades

17

Orga Or gani nizi zing ng Your our Tradi rading ng Reco Record rdss for for Tax Purp Purpos oses es

20

Designing Your Office for Trading

21

2 Rick Saddler – Trading for Profits, LLC Copyright © 2015 All Rights Reserved.

hitandruncandlesticks.com REV 08/14/2015 May not be duplicated or distributed without permission

INTRODUCTION Trading stocks is one of the most rewarding careers of my life. The path to my successful trading was not without pitfalls and disappointments. Along the way I learned to persevere and pay attention to my mistakes and take action to fix them. I started to earn profits consistently when I developed a disciplined approach to my trading. This included designing trade plans for every trade and making changes to my trading approach based on my notes and observations about my habits and practices. We all want instant success and immediate gratification for our efforts. With trading you will need patience and the drive to succeed over a long period of time. Obviously, success will happen more quickly for some people than for others. The most important focus should be on you and how you evolve as a trader. This book is a collection of habits and practices of successful traders. Your challenge is to seriously read through these habits and practices, compare them to your habits and practices and modify your approach to trading. The more you study this book and make the effort to take action based on what you read, you will develop the discipline it takes to be a successful trader. There is always room for improvement. Whether you are just starting out as a trader or a seasoned trader who is struggling, this book provides insights that you can use to grow successfully as a trader. If you have questions on material in this book or need help with your trading, please feel free to contact me at [email protected] . If you are looking for a supportive community of active successful traders consider joining my online stock trading room. You can sign up for a 2 week trial to see if it is right for you. Go to www.hitandruncandlesticks.com for more information. Best Wishes on Your Road to Success, Rick Saddler www.hitandruncandlesticks.com



TERMS AND CONDITIONS By purchasing training products and/or follow-up training, or receiving complimentary educational products and services, from Rick Saddler, hitandruncandlesticks.com or Trading for Profits, LLC, you understand and acknowledge the following terms and conditions: The content provided in these training materials is for your use only. Neither printed or downloaded versions, nor any follow-up instruction or materials, are to be copied, shared, sold or distributed to any other individual or entity without written permission from Rick Saddler. You acknowledge that you are not an agent of, or acting on behalf of, any seminar or other company that provides competitive training or products. All content in these training materials, and any related materials provided with them today or in the future, is for educational and illustrative purposes only and does not constitute either investment advice or buy/sell recommendations. The author, Rick Saddler, is not a stockbroker, broker dealer or investment adviser. He makes no recommendation either to purchase or sell any particular stock, bond, option, equity or security of any kind. No content, examples, or information provided shall be construed as a recommendation, solicitation, prediction or advice for your own actions in, and dealings with, the stock market. Trading in the stock market involves a high degree of risk and you may incur financial losses if you engage in such activity. These training courses and commentary were designed and intended to assist recipients in increasing their knowledge of the stock market and applying the techniques and strategies learned. Users are advised to apply prudent risk and money management techniques in order to protect their capital. Any or all strategies may be subject to change as needed with market conditions. The dynamic of the markets often requires that traders change their methods and systems over time. Therefore, what the author is utilizing currently may differ in the future as market conditions change and/or as the author tests new systems and learns new, more effective methods. Past performance is not indicative of future results. These materials represent the author’s knowledge and interpretation of the stock market and trading methods and techniques at the time they were developed or revised. Some of the content of these materials is subjective in nature. There is no guarantee that these strategies, techniques, systems or trading plans will suit your trading personality, but rather are intended to serve as a model. Reference above to “products and services” includes, but is not limited to: private training or coaching; phone or web-based instruction; down loadable or printed eBooks; forms and trading tools; audio/video products. The above terms, conditions and waiver of claims are provided and acknowledged at the time of registration for complimentary products, or the purchase of products and services, either in person or at one of the following web sites: www.ricksaddler.com, www.hitandruncandlesticks.com.



HABITS OF A SUCCESSFUL TRADER Every trader has bad habits that they would like to change. Some habits are buried deep within and need to be brought to the surface so they can be identified and changed. A good way to identify and change habits that are affecting your trading is to look at the habits of successful traders. While reading this chapter, do a self analysis of your habits by comparing them against the habits of successful traders. As you identify habits that you would like to change, write them down and describe what action you will take to change these habits. Then take the actions that you describe. Have a plan for every trade. This means that you write down your entry, exit and stop

loss strategy for every trade. Then execute the trade and stick with the plan. If your trade is based on a daily chart, then follow the daily chart when monitoring your position. On your trade plan write the chart frequency you will use to monitor the position. Some traders may decide to plan and monitor trades on a daily basis but use a lower time frame chart such as a 60 minute chart to monitor a position that is getting close to an exit area. Watching intraday charts for trades planned on daily charts can cause you to react emotionally and is one reason traders may close positions too early and not according to plan. This can have a detrimental effect on profits. Base your trade plan on what you see and not what you predict. What you see on a

chart is fact. What you predict is fiction. No one has a crystal ball that accurately predicts price action but we all have charts that give us information that contain the facts about price. One way to test yourself using predictions is to pay attention to your choice of words. Words like “I think”, “I feel” are most likely predictions. Know who you are as a trader and be your own trader. Do you have the personality

for swing, day or long term trading? Stick with the type of trading that fits with your lifestyle and personality. Be your own trader and don’t be a follower. You need to be confident in the trades you execute and this means understanding the trade and believing in the trade. Just because someone else takes a trade doesn’t mean it is right for you. Focus on the best trades for you. Study stock charts and identify high probability setups.

Start with one or two trade setups, master them and then add more setups. Have a “Trading Business Plan”. Every successful business owner has a business plan.

Since trading is a business, traders should have a business plan. There is a lot of information out there on designing business plans. A suggestion is to keep it short and simple. A one or two page business plan is sufficient for most traders. You can always add to it as you go along. The point is to have a business plan that is convenient and you will use as a reference to certain aspects of your trading. Important topics to address in the business plan are 

Describe what kind of trader you are. Are you a day, swing or long term trader. 5

Rick Saddler – Trading for Profits, LLC Copyright © 2015 All Rights Reserved.


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What time frames during market hours will you be trading? How much capital do you have for trading and how much of that capital will you commit to any one trade? What trade method and trade setups will you be trading? If you are trading price patterns, indicate what chart time frame and what patterns you will be trading. For each trade setup, describe the entry, exit and stop loss strategy. Include a description of when you will add to a position, raise your stop and scale out of a position. Under what conditions will you stop trading for the day, week or month. For example, “You (the trader) will stop trading for the day or week if you have 3 losing trades.” What is your trading goal? Describe any psychological rituals you will use to stay focused or get focused. Some traders will use tapping sequences, meditation or other form of behavior modification technique.

Document every trade. Use a spreadsheet/log to document your trades. In addition, you

may want to mark up a stock chart for each trade. On the stock chart, you indicate your entry, target and stop. You can also mark resistance and support areas along with trend lines and other notations to help manage the trade. Many stock trading programs have an annotation feature that helps you mark up charts. Save these marked up charts in a file or print them off for review. Review your trade journal/log and identify areas of improvement. This is one of the

best ways to grow as a trader. You may want to write a weekly summary of what you will do in the next week to improve your trading. Know when to trade and have the discipline not to trade. Trade only when the market

gives you clear direction. If you are confused, have trouble finding trades that meet your rules or do not know what to do, these are signs that the market may be in a state of flux and not conducive to your style of trading. There are times to stay in cash or just manage the positions you have working. It is okay not to trade every day. In fact, forcing trades in an undesirable market often leads to losses. Have patience and wait for your setup! Accept your losses. No one is right all of the time and trade setups do not always go the

way you want them to. That is why you place stops with every trade entry. A stop is what you plan in advance and are willing to risk for the reward you specified in the trade plan. Traders that don’t want to accept losses or set stops frequently let their losing trades run. They may even average down as price is falling only to watch the loss grow. Eventually, these traders are so devastated financially and emotionally that many quit trading. Copy the sentence below and post it where you will see it. It is not whether you are right or wrong on a trade it is how much profit you accumulate in your account! 6 Rick Saddler – Trading for Profits, LLC Copyright © 2015 All Rights Reserved.


Take action! You may have the best intentions by developing a plan for every trade and

documenting every trade. The most important thing is to execute the trade according to plan and to review your documentation with a critical eye and make changes in your trading behavior that will improve your trading results. Be honest with yourself when evaluating your performance and take responsibility by taking action to improve that performance. Have a trading goal. Set a realistic goal so that you have a benchmark for measuring

your improvement and trading success. Some traders establish a daily, weekly or monthly monetary goal. You may also consider a daily, weekly, or monthly percentage goal such as 2% return on capital per week. Set the goal that makes the most sense for you. The point is “set a goal” and keep track of your progress in meeting this goal. Develop the right attitude about your trading business. What does this mean? Take a

proactive approach to achieve positive results. Actions you can take toward developing the right attitude are -Identify what you may need help with and “get help”. This can be finding a trading coach, signing up for a webinar, reading written material. -Persevere! Don’t give up because you make mistakes. Learn from your mistakes by identifying them, writing what you will do to correct them and then act on what you write. -Follow and execute all plans that you make. You constructed these plans for a reason so keep these plans handy so you can refer to them often and take the planned action. By taking these actions you are being proactive to making the necessary improvements to keep your trading business moving in a positive direction. There will always be rough times. Successful traders use these times as an opportunity to learn and to grow their business. Thomas Edison once said

"Many of life's failures are people who did not realize how close they were to success when they gave up."



SUMMARY

Habits of a successful trader are Have a plan for every trade  Base your trade plan on what you see and not what you predict  Know who you are as a trader and be your own trader  Focus on the best trades for you  Have a Trading Business Plan  Document every trade  Review your trade journal/log and identify areas of improvement  Know when to trade and have the discipline not to trade  Accept your losses   Take Action! Have a trading goal  Develop the right attitude about your trading business 

"The difference between who you are as a trader and who you become as a trader is what you do!"



DEVELOPING THE RIGHT MIND SET FOR TRADING Achieving the right mind set for trading is the result of a long process. It goes hand in hand with developing the skill for trading and building confidence in yourself and your trading. Don’t expect this to happen overnight. The mechanics of trading is a skill that develops over time. Along with that, as your trading skills improve so does your confidence. “Confidence” is a state of mind and what helps traders to execute trades. Think of it this way, when you don’t have confidence you are fearful and hesitant to take action. If you have confidence, you are brave and take prompt action. How do you develop the skill and confidence that relates directly to developing the right mind set for trading?  

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SKILL - Education is the foundation in developing trading skills. SKILL and CONFIDENCE - Practicing what you learn through education and by

applying that knowledge to chart reading develops skill in spotting trading opportunities. It also develops the confidence to know that these trading opportunities are profitable. CONFIDENCE - Selecting trading methods and designing trade setups for those methods helps traders to confidently execute trades.

Following this approach to trading leads to achieving the right mindset for trading. In a nutshell, SKILL + CONFIDENCE = Right Mindset for Trading. Whether you are new to trading or a skillful trader who lacks confidence, the components described here will help you to develop and maintain the right mindset for trading. Education

As with any new skill, the foundation is education. Ask yourself “would you start to build a house if you had no knowledge of construction concepts and applications?” NO! Traders first learn the basics such as technical analysis and fundamental analysis. Read books and attend webinars/workshops. This is really the start of building your knowledge base so you can later shape your trading style and philosophy. As you mature as a trader, education continues to play an integral role in your success so you never stop learning. Stock Chart Reading

This is where you start to apply what you have learned in the education phase. Choose a stock charting platform, set up your charts using your favorite price display (e.g., candlesticks, bar, line) and technical indicators (e.g., moving averages, MACD, Stochastics). Then scroll through a series of charts drawing horizontal lines to notate support and resistance, drawing circles around price patterns, drawing trend lines and notating the outcomes of price patterns (e.g., this price pattern price advanced 5% before hitting resistance). Notating the outcomes of price patterns will help you to determine which price patterns are most profitable. Reading stock charts is like learning a new 9 Rick Saddler – Trading for Profits, LLC Copyright © 2015 All Rights Reserved.


language, the more you practice reading the charts, the more proficient you become. This is a very critical step in developing confidence in your trading which leads to being in the right mind set. As you read hundreds and even thousands of charts you are training your eye to see certain patterns. As you practice reading and flipping through charts, you will be amazed at how quickly you will be able to spot certain patterns and trade opportunities. Traders who are proficient at reading charts and have a list of profitable patterns often use scanning software to generate lists of stocks with those patterns. These scans are great as a tool to narrow down the selection of stocks to view. Traders still need to view each stock chart on the list generated by the scan in order to select the stock with the best potential according to their rules. Trading Methods and Setups

During the beginning phases of your educational journey, you are simply collecting knowledge and exploring many different aspects of trading. You might say that you are collecting the ingredients necessary to develop trading methods and setups. While practicing your chart reading skills you are building confidence in identifying the chart characteristics you want to focus on. Trading methods relate to what kind of trading you will focus on and the intricacies of those methods that become part of your library of trade setups. These trade setups supply the framework for executing your trades. Building solid trade setups is the key to building your confidence as a trader. The more success you have with these trade setups the less fearful and less hesitant you will be to execute them. It is essential that you write down every trade setup in terms of your entry, exit and stop loss strategy. This way you always know what you are risking on each trade, where you will enter the trade and what your potential profit is on that trade. This helps to minimize emotion and maximize discipline and confidence. To give you an idea of what a trading method is consider that you have decided to trade price patterns using candlestick price displays on a daily chart. Trading price patterns using candlestick price displays on a daily chart is a trading method. Within this trading method there are various patterns such as the “W” pattern, Head & Shoulders pattern, and J-Hook pattern. Let’s say you limit your trading to these 3 patterns because they are easiest for you to spot, understand and through your stock chart research have found them to be profitable. The next step is to design a trade setup for each of these patterns. With each trade setup, you describe your entry, exit and stop loss strategy. In addition you add that each trade must have a certain risk to reward ratio. For example, every trade must have a 3-1 reward to risk ratio which means that if my stop represents a $.50 loss, my anticipated reward must be at least $1.50. Sample J-Hook Pattern with Trade Setup - Next Page



Trade Setup Entry - Enter on the day of the breakout if the candlestick looks like it will close above

the breakout level. Another entry is the day after the breakout on an opening price above the breakout level. Stop - A price below the breakout level. Consider your risk tolerance when setting this

stop. If the stop price is more than you can tolerate, then move to another trade. Exit - Determine resistance levels and use them as possible exit areas. When price

approaches one of these areas, look for candlestick sell signals and then decide if you will take all or part of your profits. At the very least, raise your stop to protect profits. Reward to Risk Ratio - The exit for profit must be at least 3 times the stop loss. Personality Assessment

Traders determine which types of trading are right for them after they are well educated in the types of trading. Traders who do not want to sit at a computer all day long may choose swing trading or long term trading. Traders who like a lot of action and make decisions quickly and don’t want to hold positions overnight may choose day trading. Assessing your personality may take some time and many traders try different types of trading to see what they are best suited for. When starting out, it is best to focus on education, stock chart reading and trading methods/setups using daily charts. Over time it 11 Rick Saddler – Trading for Profits, LLC Copyright © 2015 All Rights Reserved.


will become clear as to which style of trading best suits your personality. SUMMARY

The Right Mindset for Trading is achieved by developing your trading skills and building your confidence in executing trades. This is a process that involves education, stock chart reading, and designing trade setups for the trading method you select. The bottom line is SKILL + CONFIDENCE = Right Mindset for Trading



DEVELOPING A DAILY, WEEKLY AND MONTHLY ROUTINE Human beings are creatures of habit. Most of us are comfortable when we know what we are going to do for the day and accomplish more if we make a to do list. Did you know that if you practice a new routine everyday for 21 days it becomes habit? Successful traders follow a routine. This means that they perform certain activities to prepare for trading, to monitor trades and to review trades for different purposes. This helps traders to stay focused on their trading business and goals. The types of activities that traders perform can be grouped according to frequency. The specific activities that each trader performs at any point in time will vary because of different trading styles. The point of this chapter is to help traders through a process so that they can develop a daily, weekly and monthly routine that works for them. DAILY ROUTINE

Start by dividing the day into logical sections. Then within each section follow the directives that are presented. The directives within each section are not all directly related to trading because we all have other things that we do during the day. All daily activities need to be addressed otherwise we will find excuses for substituting one activity for another and that defeats the purpose of establishing a routine. Obviously, special events do occur. It will be up to you to address these special events without completely disrupting the daily routine. Feel free to add or change a section according to your routine. The point is to detail all common activities you perform during the day. It is okay to add or delete activities as you develop your routine. The primary purpose is to establish a routine. Morning Personal Activities (indicate from what time to what time this pertains to you) 

List all activities that you perform before going to your office or trading desk. Examples are -Awake at 4am -Walk the dog -Eat Breakfast -Shower -Exercise -Pray

Premarket Activities (indicate from what time to what time this pertains to you)  

Indicate what time you will be at your trading desk Indicate how often and what kind of emails you will look at during market hours. Emails are a distraction and may negatively effect your trading performance. The 13



  

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same goes for phone calls. Check that your computer and connection is working and brokers and stock charting software platforms are up and running. List what system updates you will forgo until after the close. List specific market related activities that you perform premarket based on your trading style. Examples are -Review premarket 5 min, 15 min, 60 min charts for futures markets and for stocks placed on watch list last night. -Review premarket 30 minute charts for all trades to be placed today based on trade setups constructed last night. -Review Asian and European markets -Review day trade rules and select stocks that meet that criteria in premarket. -Review news events and company earnings reports that occurred overnight and premarket and evaluate the impact on open trades and trades to be executed today. -Review a list of economic reports that are to be presented for the day for potential impact on your trading. Mentally prepare yourself for today’s trading. Some traders do tapping sequences or meditate. Others perform a self check (e.g., state of mental focus (are you distracted or focused on trading), level of anxiety, mental disposition (is it positive or negative), general health (feeling well or feeling ill)

Market Open and Morning Market (indicate from what time to what time this pertains

to you) 



List all activities you perform during this time Examples are -Enter planned trades only -Review open trades and adjust stops and exit targets according to trade plan. You may decide not to look at intraday charts during the day for these trades. If so, then make it a rule. List any rules that you follow during this time frame Examples are -Wait 10 minutes after the open to place trades -If there are economic reports, stop trading 15 minutes before the reports and wait 5 minutes after the reports to place trades (you will have to determine if these reports impact specific trades). -Stand after sitting for one hour or other quick exercises -Review your “stop trading rules” (e.g., stop trading after 3 losing trades or after a certain amount of profit or loss)

Midday (indicate from what time to what time this pertains to you) 

List all activities your perform during this time 14



Examples are -Eat lunch -Exercise -Walk the dog -Review stocks on watch list 

List any rules that you follow during this time frame Examples are -No new trades entered during this time

Afternoon Market (indicate from what time to what time this pertains to you) 

List all activities you perform during this time Examples are -Enter planned trades only -Review open trades and exit targets and adjust stops according to trade plan.

After Market Close (indicate from what time to what time this pertains to you)

List all activities you perform during this time Examples are -Log all new and closed trades for the day -Review closed trades and make notes on each trade for later review (e.g., trade was a loss because I didn’t follow my rules. Exited trade too early should have done xxx. Great trade!) 

 

Review charts and prepare trade plan/setups for next market day. Review market and other news events for impact on new and open trades.

WEEKLY ROUTINE

This is where you list all trading related activities that you will perform at week’s end        

Review all closed trades and make note of things you can do to improve your trading. Describe in writing all mistakes made during the trading week and specify how you will prevent those mistakes from happening in the coming week. Calculate your total profit/loss for the week and compare this to your goal. Write your monetary goal for the next week. Review upcoming webinars and workshops and signup for those of interest. Review stock charts and write trade plans/setups for upcoming trading week. Make note of earnings reports, dividends and stock splits in the coming week for stocks for which you have open trades or for those you plan on trading. Print a list of economic reports for the coming week. 15



MONTHLY ROUTINE

This is where you list all trading related activities that you will perform at month’s end. Ask your accountant for suggestions here especially if you pay quarterly estimated taxes.      

Print off monthly account statements for all trading accounts. Compare trading activity on monthly account statements to your log and note any discrepancies. Calculate your total monthly profit/loss. Did you meet your goal? Write all of the improvements that you will make for the upcoming month. Review the improvements you wrote last month. Did you make these improvements and what was the result? Treat yourself to something special - You worked hard and deserve it!

SUMMARY

It is important to establish a routine to maintain the discipline needed to be a successful trader. Once you establish a routine and practice it for 21 days, it will become habit and a good one at that. As your trading progresses and changes, the details of your routine may change but the point is to have a daily, weekly and monthly routine. Your trading business depends on it!



Trade Log DOCUMENTING YOUR TRADES Documenting your trades is one of the most important aspects of successful trading. This is the only way that traders can determine how they are doing. It answers questions like “what was my profit this week or month”, what mistakes am I making”, and “what is working for me and what is not”. Keeping written documentation of your trades holds you accountable for your trading actions and demonstrates how serious you are about your trading business. Some traders may say that they use brokers statements and trade confirmations as documentation of trades. Many of these traders print these documents and throw them in file cabinet only to look at them at the end of the year. This may be fine for your accountant but not for serious traders. There is no substitute for logging all of your trades on a spreadsheet and making notes that help you to improve your trading. No trader is perfect so striving to improve the results of trading is a never ending journey. Trading is a business so treat it like one. Think of your trading log or spreadsheet as your “cash drawer”. Cash goes in and cash goes out. Successful business owners reconcile their cash drawers at the end of every day. As a trader who treats trading as a business, why wouldn’t you want to reconcile your cash drawer? Most traders who don’t keep a log of their trades are usually those who don’t want to know how badly things are going. If that is the case, then these traders should not be trading because they are not taking responsibility for their trading and are not serious about being successful. What is a good way to document trades?

Start by thinking about important components of each trade transaction. This relates to the accounting aspect and the accountability aspect. The accounting aspect relates to numbers and other information you need to track your monetary performance and reconcile your brokers statements. The accountability aspect refers to the information that you will use to evaluate what you did right or wrong in order to make improvements to your trading. These are two different perspectives and both are important. Make a list of the components For example, 1. 2. 3. 4. 5. 6. 7. 8.

Date the transaction is initiated or opened Date the transaction is closed Stock description or ticker symbol Number of shares Buy to Open (BTO) price (long position) Sell to Open (STO) price (short position) Buy to Close (BTC) price (short position) Sell to Close price (STC) (long position) 17



Trade Log 9. 10. 11. 12.

Stop price Profit/Loss (P/L) Trading Strategy (reason for the trade or type of trade setup) Trading notes and comments

This list of components provides accounting information and information that holds you accountable for each trade. Buy reviewing the results of transactions using these components you will be able to answer questions like “what was my profit or loss?”, why did I take the trade?” (Strategy) “what could I have done better with the trade?” (trading notes and comments)?”. Sample Spreadsheet /Trade Log

The Sample spreadsheet/trade log on the next page is just a suggestion. Feel free to modify it to make it most useful for you.



Date Open

Date Closed

Stock

# of shares

BTO Price

STO Price

BTC Price

STC Price

Stop Price

P/L

Strategy

Notes/Comments

19 Rick Saddler – Trading for Profits, LLC hitandruncandlesticks.com Copyright © 2015 Rev 8/14/2015 All Rights Reserved. May not be duplicated or distributed without permission

ORGANIZING YOUR RECORDS FOR TAX PURPOSES This chapter is no substitute for using an experienced tax accountant that is well versed in the tax implications of trading. The number one suggestion for this chapter is to find a good tax accountant and ask them for their ideas on what information they need in order to do your tax return. Tax implications will vary depending on what country you live in. All the more reason to find an accountant. Use this chapter for suggestions on organization and modify your approach to organization according to your specific requirements. Find an experienced tax accountant. Interview accountants in your area and ask them

about their experience with preparing tax returns for active traders. Ask them about alternatives on how you should establish your trading business based on your situation. Talk about how income and expenses are handled under each alternative. The answers you get during these interviews will help you to understand what information to collect and how it should be organized. When you decide on an accountant,

ORGANIZING YOUR RECORDS FOR TAX PURPOSES This chapter is no substitute for using an experienced tax accountant that is well versed in the tax implications of trading. The number one suggestion for this chapter is to find a good tax accountant and ask them for their ideas on what information they need in order to do your tax return. Tax implications will vary depending on what country you live in. All the more reason to find an accountant. Use this chapter for suggestions on organization and modify your approach to organization according to your specific requirements. Find an experienced tax accountant. Interview accountants in your area and ask them

about their experience with preparing tax returns for active traders. Ask them about alternatives on how you should establish your trading business based on your situation. Talk about how income and expenses are handled under each alternative. The answers you get during these interviews will help you to understand what information to collect and how it should be organized. When you decide on an accountant, ask for a list of information relating to income and expenses that you should collect. Also ask, if they have a preference as to how it should be organized. Collect all sources of your trading activity. This includes trade confirmations, monthly

broker statements that itemize all transactions and your transaction spreadsheet/log. Remember to reconcile your spreadsheet to your brokers statements and resolve any discrepancies. You can do this reconciliation on a weekly, monthly or quarterly basis to save time at year end. Store your trading records on your computer and print hard copies. Having the information is different places is a good backup technique. Determine how often you need to meet with your accountant. Your accountant may

recommend that you meet during the year especially if you pay estimated taxes. Ask your accountant when they need information from you and how it should be organized. Gather all tax reporting forms sent to you. This includes US Federal 1099s and K-1

forms. There are certain ETFs and MLPs that issue K-1 tax forms. Do a search online for “a list of ETFS that issue K-1 tax forms.” This will give you an idea of which ones issue K-1s. Because of the complexity of reporting K-1 information on your return, you may decide not to trade these ETFs or MLPs. Again talk to your accountant about this. Keep a list of and receipts for expenses related to your trading. Review this with your

tax accountant to see how they apply to your tax return.


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DESIGNING YOUR OFFICE FOR TRADING How would you feel if you were sitting at your desk, you placed a trade and your computer screen went black? You may be feeling shocked, angry, or helpless. What would you do? You didn’t have a chance to enter your stop and you don’t have a clue as to what is happening in the market after the screen blacked out. At the same time, you may have lost data stored on your computer. If you are an active trader, there are some things to think about when setting up your office for trading. This is not a complete list but it will give you some ideas. Have more than one computer. Some traders have a desktop computer and a notebook

computer. If one stops working, they have a backup computer. Notebook computers have batteries so if there is a power outage, the notebook on a charged battery will run for awhile during the power outage. Invest in a battery backup unit for your desktop. Some units will keep your desktop

running for at least 20 minutes and sometimes 1 hour. Research the best unit for your desktop based on your system configuration. Some of these units are also great surge protectors so you get this benefit as well. Have an alternative internet connection. Consider alternatives such using your cell

phone as a backup. Many brokers have apps that you can download to your mobile devices. Have a dial up internet connection. Keep a list of your brokers’ phone numbers. Store these phone numbers in your phone

for quick access. Backup your computer data! We all know this is important but how often do we do this.

These days you can pay a reputable service to store your data. Your data is backed up automatically with their program and you have no worries. An alternative is to purchase an external hard drive and backup your data daily or at very least weekly. Get a computer that will handle the type of trading you are doing. When buying a

computer talk to a technical person and ask what configuration they would recommend for your trading needs. A computer with limited RAM storage, for instance, can slow down reaction time in placing trades and displaying real time price information on charts. Be prepared, have the right equipment for trading and you will have peace of mind.


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Successful Traders Handbook

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