As we’ve now entered the New Year it’s worth reflecting on our achievements in 2017, in relation to the ambitions we originally set for ourselves at the start of the year. Did we reach our targets, did we grow our trading account by the percentage we targeted? Did we stick to our trading plan and (in simple terms), did we make/take enough money out of the markets, perhaps enough to finally put in place a metamorphosis from part time hobbyist trader, to finally becoming full time? It can be a sobering and cathartic exercise; analysing our past performance versus our trading ambitions and its fair to say that if we attached unreasonable and over ambitious trading targets, then we may have been left disappointed and disillusioned.
Before we move onto a short list of New Year resolutions, let’s ensure that we’re attaching reasonable expectations to our trading goals. With that in mind it’s worth mentioning that some analysts and experienced traders are concerned regarding the growth of bitcoin trading and the lure of riches it offers.
The real and present concern is that many forex traders switch off, or completely abandon their capacity to learn the craft of trading: forex, equities and commodities. Why chase a 1-2% return a week, when you can potentially make gains gambling on crypto of circa 20%+ in a day? You can also: lose 20% a day, suffer a margin call, be wiped out and have your trading account closed, if you get the wrong side of a sudden whipsaw. So let’s ensure that we keep to the reasonable targets we have in the past and organise our trading plan accordingly. Remember that consistent 1% returns a week from the forex markets (before compounding), would have you out performing the majority of forex hedge funds.
Six quick 2018 resolutions.
I will control my emotions.
Easier said than done and time in the markets/experience does tend to reduce the emotional impact on our trading. We must recognise that there are no advantages to letting emotions overrule our trading decisions, there are no benefits trading from hunches. We have to find methods (crucially our own methods) that personally work for us, to minimise and if possible eradicate emotions from our trading. Automation can help.
I will automate when possible.
If you’re a novice trader then why not use this year to experiment with part automation? This will help with the emotional interference previously mentioned. We could automate by using stops, we could automate by using take profit limit orders. We could establish price levels at which we want to enter the market, we put our market orders in and wait for price (and the market) to come to us.
I will not over trade.
We have to develop the discipline to not over trade (occasionally this may be classed as revenge trading), if not then the damage to our account can be significant and in some instances terminal to our trading ambitions. Retail platforms can’t be coded to lock us out of the market if we’ve lost a certain percent of our account per session, or per trade, therefore we need to apply our own circuit breakers.
I will not move my stops.
There is no point in using stops to then move them in order to accommodate a hunch or market development. These excellent physical tools are primarily for our protection. We should place them where we are convinced that our trade is no longer valid, a place where our decision has proved to be incorrect. If we don’t obey our stops, or indeed our take profit limit orders, then where do we stop our interference? Do we move our loss limits and profit limits at will, never sticking to our plan, which we’ve presumably dedicated countless hours to perfect?
I will stick to my trading plan.
We have to stick to our plan, it’s the absolute credo we have to attach all our decision making too. It may be a work in progress, it may need slight fine tuning and micro adjustment over the months and years, but we have to create a template and base to work from. If not then all our trading decisions are simply random judgments, based on nothing except hunches and knee jerk reactions.
I will only risk a small amount per trade.
Setting ourselves realistic targets is (as mentioned previously), absolutely critical to our trading performance and future. If we set ourselves a realistic annual account growth target and work backwards, then we can begin to establish what level of risk v return we can expect. For example, and as also mentioned earlier, we may aim to make circa 50% account growth per year, roughly 1% per week.