Record Keeping: Keeping accurate records of your online trading is vital,online stock trading both for financial record keeping, and also so that you have a log of your trades for future reference.

Online stock brokers can and do make mistakes, and if you place orders over the phone you will need to have detailed records in case of any future disputes. Record keeping is important and yes I know it can be boring, but trust me you will be grateful to me one day. While you may remember a particular trade you executed today, in 6 month’s time you won’t and it’s a lot harder trying to find the information and remembering exactly what happened and why. In addition ( unless you are trading a tax free system such as spread betting or fixed odds trading ) you will need to produce records for the tax authorities, so please start as you mean to go on!

Record Keeping – Trading Records

Yes, surprise, surprise you need to keep trading records of your online trading. In any other business you would keep records so why not in for trading. I am a great advocate of manual records. All online brokers will have different methods for monitoring and recoding trades. Check with your broker before you start. There may be a cost for manual contract notes etc. The reason I keep manual records of trades in stocks shares and options is simply because it is what I prefer. I can refer to it without going on line via various passwords to my account. It also acts as a check if there are any discrepancies with the broker ( rarely happens with online trading ). This can occur when placing orders via the phone – you may prefer this particularly when spread betting. In general all calls are recorded to check that trades have been entered correctly. Below is a simple page for share trading, which would be OK for UK/US shares and spread betting. Note that if you are trading shorts I would record these separately so they are not confused with your long positions, and perhaps even have a completely separate record book.

Share Ticker Date Bought  Time  Date Sold        Time  Quantity          Buy Price         Sell Price         Stop Loss   Date  Dividends       Costs Net Profit

OK, it looks like a lot of information – it isn’t. In the above table are all the details of the trade at your fingertips. Trust me you will be grateful – it will save a lot of time at the end of the year. in column 1 and 2 you have the details of the share or stock, followed by the date you bought or sold. ( if this is a short selling share then the date sold will be the first entry as your opening order is a sell order – remember ! ) You should record the time of the trade. If you place trades via the phone and the tapes have to be checked it helps if you have a time for the trade. Next is the quantity followed by the price that you bought or sold. For a buy order this would be your opening order. Next, the most important STOP LOSS. You might wonder why there is a date for this also – the simple answer is of course that you record the same date as when you open your order. However, you may decide to move your stop loss to lock in some profit, so you need to keep a record of where it is ( in value ) and when it was moved. (REMEMBER YOU ONLY MOVE STOP LOSSES UP ON LONG TRADES AND DOWN ON SHORT TRADES – NEVER ANYTHING ELSE ). The last but one column is for costs. In the UK this will be stamp duty and commission. The next column is for any dividend received. Once you have closed a trade ( or been stopped out ) you can calculate your profit or loss and enter in the last column. (the difference between bought and sold prices and deduct costs ) I always enter my profit in black and (loss in red in brackets)

Now, you can modify the above or develop your own, but please do it. Please keep all your contract notes and any other statements sent from your online broker – you will need these for tax purposes. In the UK there is CGT to pay but your allowance is currently £8,500 in profit ( 2005-2006 ) which should be easy for you to calculate from the above records. If you manage this in year one, then please let me know and you can show me how to do it!! There is also another reason for having the above records, and this goes back to your money management rules. From the above records you will be able to keep a check on how much of your online trading capital you have exposed to the market at any one time. You can set up a small spreadsheet if you like and enter daily closing prices to calculate this automatically.

When you start trading covered calls with options, not only will you have the above details to record, but also details of the option as well. This will include the option code, quantity, premium received, expiry date, dates bought and sold, whether the contract expired worthless or was exercised etc. If you would like details of this please just send me an email and I would be happy to provide details of the records I use. Finally, please keep a diary. This will give you an insight to your trading – note how you feel when you place trades, what you were doing, the reasons for the trade, where you feel you might exit the trade etc it will give you an insight into your trading and investing style. I realise that keeping records is very boring, but like all things in trading it is essential if you are to keep control of your online trading business, and to give you a manual check on progress.

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