5 Things you need to do before your next trading year
2015 is almost over and there’s no better time to sit back, take some time away from the charts and focus on self improvements.
The week between Christmas and New Year’s Eve is a perfect opportunity to stay away from the illiquid holidays markets and spend time reflecting on your trading performance during the passing year. From clearing your mind and dealing with your psychological weaknesses to detailed analysis of your trading performance – Spending this time will assist you in becoming a better trader in your next trading year.
Most traders, especially newbies, tend to get caught up with the day to day action during the regular trading year and spend little, if any, time to audit their performance. If you are one of these traders or if you don’t know how to audit your trading performance, stick around till the end of this blog post and I guarantee that by the same time next year you’ll be thanking me.
Performance auditing, or performance analysis, for example, can make wonders to you as a trader – It expose your weaknesses, reveal your advantages, discover your edge and eventually improve you as a trader. It will also help your trading account to grow cause after all better trading = more money.
Here is my recommended list of 5 things that you should spend your time doing before each trading year:
Review Your Trading Performance – Performance analysis
Trading performance is what ultimately counts. The “results factor”. The bottom line.
There are many ways to analyze and measure one’s trading performance but the key questions that you should definitely ask yourself are:
- Were you profitable in the passing year?
- What is your total net profit loss?
- What was your Max Draw down?
- What was your average Trade Net Profit?
As mentioned, these are just some of the measurements parameters that can be used to review your performance. There are many other parameters, factors and statistics that you can learn online and add them to your performance analysis but the key to do it – at least the minimum.
Dig into the numbers, find as many patterns as you can and use this data to understand where your edge is found.
For example, performance analysis can reveal that your worst trading day is Monday. In such case, a decision not to trade on Mondays will have positive impact on your trading performance on the following year.
(Performance analysis requires you to store data of your trades. If you do not have your data, that should be your first task for 2016 if you want to become a better trader)
Start Fresh and Unbiased
One of the worst psychological phenoms that we, as human beings, deal with when it comes to trading, is our nature and tendency to be biased.
Most traders fail because they tend to see only what they want to see and not what the price action is telling them – Instead of trading the price, these traders trade their hopes, dreams or beliefs. Biased trading can not only cost you with losing trades, it can also cost you by missing out many trading opportunities that the market present on a daily and weekly basis.
A new trading year is the perfect time and opportunity to start fresh without any bias. Clean start, objective as you can be.
- Clean your charts – Start by erasing your existing analyses from your charts. Delete all price zones, trend lines, indicators or markings that you may have had on your charts – Start your analysis all over again. You’ll be amazed to see that things sometimes may look completely different.
- Double check all of your longer term trading ideas – Make sure that trade ideas that you were monitoring are still valid with your new analysis.
- Learn and mark the longer term trends and patterns (based on monthly and weekly charts analysis) – That will help you to understand the markets conditions and tell you where you should put your focus on.
Once you are finished with these tasks, sit down and write your conclusions. Save them, print them and hang them in front of you that you’ll be able to see them throughout the year. Chances are that for most of you this will be the most objective analysis that you’ll have for the rest of the year.
Review and adjust your trading rules
Your trading rules are the foundation stones in which your trading performance is built upon.
If your trading rules do not provide you with an edge, the end result will always be the same – Failure.
You can’t be profitable without solid and reliable trading rules.
Assuming that you have trading rules that provide you with an edge, the end of the year is the perfect time to see that they remained valid.
As the markets (and as you) continuously evolve and change, sometimes trading rules need to be adjusted.
Most of the adjustments can be made following proper performance analysis, but there are also changes that perhaps need to be made due to other reasons… for example personal reasons – Changes in your own risk tolerance, less (or more) available time, family related reasons etc…
(If you do not have trading rules, risk Management rules or you are not keeping a trading journal, that’s definitely a task you should complete during 2016)
Search the net – Learn and educate yourself
“Investment in yourself is the best investment of all” – Instead of wasting time trying to trade a thin market, spend your time wisely and further educate yourself about trading.
Even if you are already a profitable trader, you can always learn something new. Search the net for interesting trading related content, trading ideas, look for interesting forums and new contacts that will provide you with better trading edge in the following year.
- Make sure your social networks follow people\channels\blogs that provide real valuable content and harness the power of these networks to your advantage.
- You don’t have to be aloe – – Trading can be a very lonely profession. It doesn’t have to. Seek high quality forums or trading networks like TradingView
and Stocktwits, sign up and connect with other traders
Start the new year with a winner’s attitude
The final thing, and perhaps the most important one – Start your next trading year with a winner’s attitude!
It sounds so simple, yet so many people fail in doing so.
Tell yourself that YOU WILL DO BETTER NEXT YEAR. Leave the past performance in the past (but learn from it – as explained above)
Attitude and mindset is more than 50% of what you need to become a better trader – Start your trading year with an Mental Edge.
(if you want to read more about winning attitude in trading, read my favorite book – Trading in the Zone)