5 New Year Resolutions for Traders

The New Year brings with it great hope for change and self-improvement. As a financial trader, it’s also a time for critical self-reflection. Looking back on the year that was, can you honestly say you traded effectively? Were you disciplined and logical in all your maneuvers, or did you find yourself making the same mistakes over and over again? By answering these questions honestly, you can put your best foot forward in improving your performance in the new-year. To help you get started, we’ve compiled a list of five resolutions that can help you improve your performance in 2016.

Resolution 1: I will not be influenced by day-to-day drama

As a trader, your success is tied to your ability to synthesize a vast swathe of information into a coherent worldview about the markets. Once you’ve formulated an outlook you feel strongly about, you need to stick to it and not let day-to-day fluctuations impact your trading behaviour. If, based on your research, you strongly feel that the stock markets will be extremely bearish in 2016, set your strategy accordingly. The fact that the markets may rise one day shouldn’t impact your “big picture” understanding of where it’s headed.

At the same time, it’s equally important to realize when you’re wrong. There’s a difference between day-to-day fluctuations and trends. If long-term market trends go against your outlook, understand why and adjust your strategy accordingly.[1]

Resolution 2: I will develop a winning attitude

“What the mind of man can conceive and believe, it can achieve” – Napoleon Hill[2]

An often overlooked aspect of becoming a successful trader is developing a positive attitude. After all, humans become what they think about most of the time. By writing down your goals and reading them daily, you will remain motivated to succeed in the face of adversity. You will also remember that becoming a successful trader is a marathon, not a sprint.

Here, it’s important to read inspirational words of wisdom from great thinkers, businesspeople or anyone else you admire. By developing a positive mindset, you can achieve far more than you otherwise would.

Resolution 3: I will define my loss limit

Losses are bound to occur in trading. This shouldn’t deter you from entering the market, but it should make you cognizant of how much you’re willing to lose before exiting a trade. It’s important to set an absolute limit on how much money you can afford to lose on any given position. This includes setting daily, weekly and monthly loss limits[3] and making use of tools like stop-loss and take-profit orders. By leveraging these tools, you can avoid blowing out your account on one or two bad positions, or worse, going into debt.

Resolution 4: I will devote enough time to trading, but not a second more

A lack of focus is one of the biggest challenges that traders face, especially those of us who are accessing the markets on a part-time basis or around a busy schedule. This often leads to counterproductive practices, such as over-trading and multitasking. To avoid this, you need to devote a certain amount of time each day to trading. No distractions, no multitasking. You may also want to limit all trading activity to a certain room in your home, office or workstation. By doing so, you will maximize your productivity when in front of a trading screen so that you don’t have to worry about trading at other times during the day.

Resolution 5: I will finally diversify

The power of the financial market lies in diversification. Stocks, indices, currencies, commodities, options and innovative products like ETFs are all just a click away. Unfortunately, many traders get caught up in only one or two asset classes, and by extension, one or two securities within those asset classes. In 2016, one of your main goals should be to finally diversify your trading portfolio. Before the end of the year, you should be comfortable enough trading at least one other asset class. This will go a long way in helping you manage risks and increase overall returns in the long run. Your ability to diversify also gives you the tools to better understand the financial markets and adjust your portfolio of holdings accordingly.[4] In a volatile global financial market, diversification is an essential practice.

[1] Kitco News (January 10, 2014). “5 New Year’s Resolutions from 5 Expert Traders.” Forbes.

[2] Nial Fuller. “Daily Affirmations Will Improve Your Trading.” Learn to Trade the Market.

[3] Bigtrends (December 28, 2012). “5 New Year’s Resolutions for Traders.” Bigtrends.

[4] Bigtrends (December 28, 2012). “5 New Year’s Resolutions for Traders.” Bigtrends.

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