Trading as a profession is a solitary business, so having your own goals can be one of the best ways to stay motivated and determined. With the start of a new year, it is essential to take stock and create actionable goals, after careful research and consideration. This will also push you towards developing effective habits to achieve what is desired for 2019.
Evaluate Trade Goals and Actions of the Past Year
Open your trade diary and look through the highs and lows of the year gone by. Before taking the next course of action, it is essential to identify previous mistakes; which strategies worked and which didn’t? Why? Identify the steps that are essential to avoid repeating failures. Is it a new trade terminal that you need? Do you need to reconsider the amount of time you devote to trading? Has your health been suffering? Identify the stressors of the previous year and make plans to deal with them.
Define the Basic Plan
After you have carefully evaluated last year’s P/L sheet and trade diary, get down to defining your current year’s objectives. Decide on the trading hours and your profit goals. The currency markets are open 24-hours a day, so decide the slot you want to leverage on. For instance, the most liquid time for the US equity futures market is from 7 AM CT to 11 AM CT. Are you going to trade all day or just early mornings and late nights?
Decide on the instruments you want to invest in, depending on your personality. Are you a position trader, swing trader or a scalper? You also need to decide whether you are interested in an asset that is more volatile or something that has a slow grind. The profit goals should be realistic, measurable and time-bound. For example, beating the bear market by 15% or hedging 20% of the trades.
Determine the Risk-Reward Ratio
You have to determine your trade capital, and the portion of it you are ready to lose. If you are an active trader, who is on the constant lookout for short profitable opportunities, you need to develop discipline to avoid losses. For instance:
- Changing timeframes and continuously looking for different strategies that provide an edge.
- Getting into the habit of cutting losses early on.
- Not letting a good gain disappear, by taking profits early. This is called “keeping accounts high.”
- Cultivate discipline to avoid getting trapped in emotions like greed, fear, and revenge.
Brush Up Market Knowledge Everyday
2018 was an eventful year for the financial markets. And, experts say that the volatility of the markets will continue into 2019 as well. Be aware of news releases; if you do not have an economic calendar, now is the time to get one. Brexit is scheduled for March 2019, and the US Fed is expected to raise interest rates in the next few months, again. Your market moves will have to adapt to these developments, so stay abreast.
Evaluate the Results Each Month
The purpose of trade goals is to learn from your efforts and strive to improve every day. Create process-related goals, so that you don’t stray from the decided path. For instance, it is good to create a system for entering trades only when they fulfill specific criteria. This helps avoid unnecessary risk.
And, finally, start a trading diary, if you haven’t already invested in one.