Hello traders and Happy New Year! For my first newsletter of the New Year, I’d like to make some resolution suggestions that could help improve trading results. Let’s go!
Before we begin, I’d just like to mention that I know most New Year’s resolutions end up failing in under a month. This is a bit sad, so at the end of this article I’ll offer a couple of motivating suggestions to help keep these resolutions going!
New Year’s Resolutions for Traders
Resolution number 1: Get better at letting winners run.
Sounds easy enough, right? The fact is, though, that many new traders take profits too quickly. Those who have been reading our newsletters or researching trading for any length of time have probably heard the phrase cut your losses short and let your winners/profits run a dozen different times, but how?
Traders who go back and look at last 30 winning trades and see that the trend ended within 5 – 10 pips can congratulate themselves for a job well done. If, however, the trend kept going another 50, 100, 200 pips, there were probably WAY too many pips left on the table!
For example, in this CAD/JPY chart, if a trader sold at number 1 and exited at number 2 they would have gained about 45 pips. Managing this winner properly would have given them closer to 100 pips by taking them out at number 3 instead! Then, if they sold again at number 4 and got out at 5, that would have been about 40 pips, but managing properly could have gotten them out at number 6 for about 80 pips! If they then went long at number 7 and got out at 8 they would have realized 40 pips, but trade management could have gotten them out at number 9 for 80 pips.
It is more difficult to find a new entry in a trending market than to manage an existing position, so let winners run when you can.
Resolution number 2: Spend 30 minutes a day studying.
This studying should be about either trading psychology (the hard part of trading!) or basic charting/techniques. Don’t give me the excuse that you don’t have an extra 30 minutes a day! EVERYONE can find an extra 30 minutes a day in their schedule-10 minutes here, 10 minutes there… Those you WON’T find this extra time in their schedule don’t want to improve their trading bad enough. There’s an old phrase in motivation: If you want it bad enough, you will find a way. If you don’t want it bad enough, you will find an excuse.
There are several educational trading resources available, these newsletters for one! Go back years in our archives and read Dr. Woody Johnson’s psychology pieces, read all the forex articles, I even suggest reading the other asset class articles! There are always bits and pieces from other asset classes that can be applied to forex trading. Get studying!
Resolution number 3: Exercise 15 minutes a day.
This one is for people who don’t already exercise. The benefits should be apparent to everyone, and I shouldn’t need to go into them here, but at the very least exercising can help individuals feel better physically, feel better about themselves psychologically and, possibly, live longer.
Feel free to add additional resolutions on top of these, but for the trade, these 3 would be a good start.
How to Stay Motivated and Fulfill New Year’s Resolutions
For many, the first 30 days of a resolution are easy. Staying motivated past the 30 day-mark is the trick.
My first suggestion for sticking to a resolution long-term is to display the reasons for the resolution in front of you constantly, which in this case will likely be the reason for trading as well. Most new traders/students think they want to trade to make more money. This is rarely the REAL reason. The real reasons are what more money can do for them and their family. Some possibilities are: putting kids through college, getting a bigger house, travel, etc. etc.
Once firm real reasons are established, go on the internet and get a picture of this reason. If it’s a shiny new red car, find a picture of the exact car and save it as a computer and/or phone background. This should help to maintain motivation by keeping the realization that trading foolishly will push goals/reasons for trading further away and trading smartly will cause them to get closer fruition.
The next strategy for staying on the resolution path is to be aware that trading requires a high level of patience. This is not a get rich quick scheme! Do me a favor and go out on the internet and look up doubling a penny every day for 30 days. This is a short psychology/math quiz where you are asked would you rather have a million dollars on day 1 or have the amount of a penny doubled every day for 30 days. Most people would rather have the million dollars on day 1, but the correct answer is to take the penny doubled. By taking the doubled penny route, you would have over $5 million at the end of the month! The take-away is this, be patient! The massive growth/payoff comes in just the last few days. The slow growth in the beginning might cause people to get frustrated and second guess themselves. After 10 days you barely have $5! After 20 days you barely have $5,000! Ah, but the huge gains come toward the end…be patient, the growth will be there!
Wishing you many pips in 2020!
Until next time,