Well, 2015 is in the books. Good or bad, it’s over with and we must move on. If you had a tough trading year, you’ve got to forget it. If you had a great trading year, you’ve got to forget it. What are important things to remember in 2016?
Forget The Past
Remember to forget, see what I did there?
So, you’re on a diet and you ate that whole pizza last night, eh? Do you just throw the diet out and continue to slam pizzas forever? Of course not, soon you would be 500 pounds and then you’d have all of that to worry about. No, you forget last night’s pizza and you re-establish your diet right now. And stick to it.
Took a bad trade in 2015? Maybe a LOT of bad trades in 2015? Perhaps you need to re-examine your trading plan, or get some help from a professional trader. But what’s done is done, so no whining and no regrets. Move on from here and continue.
Maintain Your Focus
The main thing is to keep the main thing the main thing. The only thing that matters is the current trade (or potential trade.) Things may be happening all around you, but you must always maintain your focus on your current trade. The market waits for no one, so don’t be checking your latest Facebook notifications or enjoying the latest cute animal video when your trade sets up. Been there, done that. Enough said.
Manage Your Risk
Never “bet the farm”. No trade is a “sure thing”. Set your maximum per-trade risk and stick to it – no matter what. A 2% loss is far better than a 20% loss which is far better than an 80% loss. Always think of the consequences of any particular trade going down to a loss. I’m not saying to trade in fear, I’m saying to imagine the consequences of a loss. If you still have a trading account after a loss, you can recover. If you blow out your trading account, you won’t be able to trade at all and you will never be able to “make it back.” As for fear, if you get dry mouth every time the position takes a tick against you, you’re not managing your risk.
Your very first order of business as a professional trader (whether you have a day job or not – trading should never be considered a “hobby”), is to protect your trading account. It is your only asset. I blew out two trading accounts learning this very thing. I was no rich kid, so it was very hard for me to re-establish those accounts. I learned the hard way. I suggest you learn from my mistakes. Establish your per-trade risk parameters in your trading plan and ALWAYS PROPERLY MANAGE YOUR RISK!
Stick to Your Plan
The Plan is the Plan. If you don’t have a plan, get one. Stick to it. Professional trading is a business. No general would go to war without a plan. No respectable business person would go into business without a plan. Make sure your plan covers all the contingencies. The plan should include when you will trade (time of day/year, mental state, etc.), what you will trade (which currency pairs, ETFs, stocks, futures, etc.), how much you will risk (percentage of account, maximum dollar amount, etc.), what trading strategy (or strategies) you will use, how you will take profit (close all at the target, half off and let the rest run, add to a winning position, etc.), what you will do with the profit (leave it in the account to grow, siphon it off as living expenses, invest it elsewhere, etc.) and under what circumstances you will stop trading (choppy market, slow/bad times of year, maximum number of consecutive losses, maximum number of dollar losses, etc.)
Don’t make changes to the plan without thorough testing. You took a loss and you want to change your plan? Bad idea. One trade is not a test. Sometimes, ten trades is not a test. Be sure any changes you make to your plan will produce sustainable profits.
Remembering these things will help you to be (or continue to be) a profitable trader in the New Year. Welcome to 2016 and Happy New Year!