I hope you’ve had a good break over the festive period, and are feeling ready to get back in the trading saddle next week.
In this week’s newsletter, I’ll give you the second half of my New Year’s trading resolutions: perhaps you might find some tips here too.
Maybe it’s the time off from trading over Christmas – or perhaps it’s the result of a bit too much brandy in the pudding, but this week’s resolutions are the results of much soul-searching and some rather painful honesty about where I go wrong with my trading …
Trading resolutions and tips – part II
6. I will not get emotional.
I will use disciplined trading strategies to keep me on the straight and narrow. Getting cross with the markets for a bad trade is about as useful as kicking a stone that you’ve just stubbed your toe on. Likewise, I shouldn’t get carried away when I have a run of successful trades. If I feel myself getting too emotional, I need to go through my disciplined strategy and stick to it. If I can’t do that – I need to walk away until I’ve calmed down.
If I find myself getting carried away with a trading story – beware! Choosing trades is not about picking something you “like” or “find interesting” – it’s about making a profit, nothing more.
7. I will not be shaken by the bumps in the road.
Trading is inherently “lumpy” – profits come in bursts, and losses have a nasty habit of bunching together. By watching my risk profile and never overstretching myself, the jolts and starts of trading won’t bother me in 2011.
8. I will not “thrill seek” – that’s what gamblers do.
I’m embarrassed to admit that one of the things that drew me to the financial markets in the first place was the thrill of trading. I can talk the talk about how I’m here because of business sense and money, but that’s not entirely true. When a trade is going my way, I get a surge of adrenaline; when it goes against me, I enjoy the thrill of hoping that it will turn around.
In 2011 and I will try to keep a check on this “playing”. These “thrill-seeking” trades sometimes bring in big profits, but they also accumulate big losses, and over the long-term, they cost me money.
9. I will not hide from my mistakes – I will learn from them.
If I don’t confront my trading errors and weaknesses, I’ll never improve as a trader. The nature of the markets is that they are unpredictable, therefore I will inevitably get it wrong some of the time.
I will keep a record of the mistakes that I make. I will not hide that record at the back of the drawer and never look at it. I will take it out and read it – however painful this is!
The very worst way to hide from my losses is by letting them run – in the belief that it isn’t a loss until I’ve closed the trade! This is how small losses turn into large ones. I must remember, there is no shame in being wrong – getting it wrong is all part of trading.
10. I will not think that I am clever.
The best trading strategies are simple, but disciplined. When I think I’m being smart, I’m usually trying to second guess the markets – this is a fool’s errand, because no one knows what the markets will do.
Stop thinking – start looking and watching.
I must not think that making my trading system ever more complex will make it more successful – no technical analysis is infallible – every trading signal will have times when it’s wrong because trading is not an exact science. Accept this and make my strategies workable and practical – aim for profitability, not perfection.
There’s some food for thought!
In the next seven days …
With the “big boys” returning to the markets on Tuesday, we can expect a corrective jolt to prices.
News-wise, some things to watch out for next week are:
From the UK, we’ve the manufacturing PMI and the net lending to individuals on Tuesday, together giving a good gauge of economic health and confidence to start off the New Year.
And from the US, there are the FOMC meeting minutes on Tuesday, and final non-farm employment figures of 2010 (December’s numbers) on Friday.
All that remains is for me to wish you a very happy and profitable 2011.