When it comes to New Year’s resolutions, most people have already fallen off the wagon by the end of January. Any fitness club owner will tell you that memberships go way up around the first week of the year but most people stop going regularly within a month or two. It’s a sad but true fact of human nature that most of people simply lack the mental ‘tools’ to make a plan and stick to it.
I want you to be different in 2019 than you were in 2018. No matter what goals you think you failed to achieve in 2018, I want you to forget about that as it’s the past. The past is the past, as they say. All we can do is look to the future and try to correct our behavior so that we stick to our plans and improve ourselves in the upcoming New Year.
As traders, we all have areas of weakness that we want to strengthen and the New Year provides us with a fresh start, a blank slate if you will, to begin anew and try to rectify any big problems we may have had over the past year. I want you to take this lesson very seriously and actually do the exercises within it, because doing so (or not) could actually make or break your trading account for 2019.
Below, you will find a list of the major issues that I know my students face as well as how to solve them, broken down into small attainable goals that you can work on over a daily and weekly basis…
Exiting trades too early
How often during 2018 did you find yourself exiting trades too early? This can truly be a frustrating problem; exiting a trade right before it really takes off in your favor. You definitely aren’t going to get ahead as a trader by taking consistently small profits, because you need to hit some “home runs” every now and then to cover your losses and put you into the black. Here are some actionable tips on how you can stop exiting too early and start hanging on to those big moves in the market:
- Remember, good trades take longer than you think to play out. Meaning, often a strong move will go much further than you think it can or will, the only factor that you don’t know is how long it will take to do so, and this is what trips most traders up. You need PATIENCE to hang on to winning trades and you also need to STOP looking at them soooo much. Trust me, when I say that checking in on your trades too often is like the “kiss of death” for a trader, I mean it because I’ve experienced it myself more times than I care to remember.
- Have an exit strategy for your trades when you enter them, or rather, before you enter them. This way you aren’t leaving the exit up to a last-minute emotional decision, which usually will be the wrong one. Obviously, there are times when market conditions can change drastically and you may be justified in an early-exit, but this takes time and experience to know and it’s something you really shouldn’t do until you’ve proven to yourself that you can stick to a more rigid trade-exit plan. Pre-define your exit at a risk reward of 1:2 or greater on every trader you enter and simply STICK TO IT. Honestly, if you just did that one thing for 2019 you would probably end up way ahead of where you did for 2018. You’d be surprised how far just a little bit of self-discipline and consistent adherence to your predefined plan goes.
Being afraid to enter, missing out on good trades
How many times have you sat there and just stared at a pin bar signal that had multiple points of confluence behind it, but instead of taking the trade you proceeded to find twenty reasons why the trade “might not work out”? Many traders do this because they are afraid of losing money. Yes, you can lose money in trading, but you should already know that going in and the only way to minimize the emotional impacts of that is to reduce your risk per trade down to a level you can emotionally handle. Here are some actionable steps you can take to reduce and hopefully eliminate fear from screwing up your trading performance next year:
- Don’t overthink a trade. If you see an obvious, high-quality price action signal that meets your trading plan criteria, set the trade up and walk way. Do not sit there digging through Google to find a bunch of reasons why the trade might not work! I have news for you, ANY trade can end up a loser! But what we are doing here is TRADING OUR EDGE and you have to trade your edge to have a chance of making money over the long-run. You will not make money if you think yourself out of every trade and behave like deer in the headlights.
- Don’t risk more than you’re comfortable with losing per trade. This will work to greatly diminish the amount of fear you feel during the trading and trade analysis process. If you know your risk per trade is capped at a dollar amount that you can sleep soundly with, then you’re good to go.
Not being realistic about the nature of trading
Guess what? You’re going to lose some trades. Deal with it. But, in all seriousness, learning to lose properly is a prerequisite for making money as a trader. If you cannot manage your risk and control your impulses to over-trade, you’re going to end up losing too much money and you’ll blow out your account. Here are some actionable steps you can take this year to become more intune with the nature of the market and what is actually possible…
- Remember: There is a random distribution of wins and losses for ANY given trading edge. No matter if you’re trading with my price action strategies or some other method, you will always have randomly distributed wins and losses. This means, you may have a 60% win rate over the course of a year, but you do not know WHICH trades will win and which will lose. So, with a 60% win rate, you could conceivably lose 4 trades in a row, out of 10, and over the course of 100 trades you could lose much more than 4 in a row and still be at 60% win rate. So, you have to ask yourself, “Am I man enough to handle a losing streak”? It comes down to managing your bankroll properly and not over-trading!
- Stop expecting to get rich quick. What does “get rich quick” look like to the average Forex trader? It looks like: adding to your position just because your up, then the market turns around and suddenly that second position is negative, now what do you do? You screwed up your trade because you were trying to make money fast and being greedy. Be REALISTIC about what’s possible and don’t get dollar signs in your eyes. Remember, the market ebbs and flows and when a position is profitable and up a lot, the market may well reverse soon. If you’re going to pyramid into a position you need to do so after pull backs within the trend in most cases, not simply when the market is in your favor and probably over-extended in that direction.
Being greedy: Risking too much or trading too much
It’s been said a million times before and it never gets less true: Bulls make money, Bears make money but Pigs get SLAUGHTERED.
Do you want to make money or get “slaughtered” by the market? Seems like an obvious answer, right? Well, most traders behave as if they want to get slaughtered by the market. Here’s how to avoid that in 2019:
- It seems obvious but let’s be honest you’re probably not doing this because most traders don’t; CONTROL YOUR RISK PER TRADE. How much $ are you risking per trade? Is that amount one that you can sleep comfortably with at night without having a sickening urge to go turn on your laptop at 3am and check what the markets are doing? Because if you are guilty of this, you’re going to lose a lot more than sleep, you’re going to lose your trading money and potentially more if you can’t control yourself.
- If you’re trading too much you’re also being greedy, you’re just going about it a little different way. Traders tend to think if they aren’t risking too much they’re not being greedy, but even if you’re controlling your risk well, if you’re trading too frequently you’re still being greedy. You want to adopt a low frequency trading approach in 2019. That, combined with managing your risk, will work to eliminate the devastating effects of greed on your trading account.
Giving back profits
Does your trading account constantly go up and then right back down to where it started? You would like it to move consistently higher with only slight downside dips in between, right? Well, then you have to stop giving back all your profits. There are many reasons why traders give back their profits, but here are some points to help you overcome this problem in 2019:
- You need to remove yourself from your computer and the charts after a winning trade. Do not sit there looking for another trade right away, chances are there isn’t one, but chances are if you sit there looking you will manifest one. Traders are at the highest risk of over-trading directly after exiting a winning trade. They feel good, they feel great, and whilst that is all well and good, you should go use that positive energy on something else, outside of trading, or you will end up giving back those profits you waiting so patiently to obtain.
- If you are giving up profits because you simply aren’t securing them, you need to make a plan to secure those profits. I wrote an article a while back about a simple trade exit strategy that you can use to help you actually secure profits instead of letting them vanish into nothing.
Not having the right strategy or trading approach
Of course, if you don’t have the right trading strategy or any strategy (many traders don’t) you will be going nowhere, fast. You’d be surprised how many traders are simply “shooting from the hip” in the market, in other words, they are randomly entering with no real solidified approach or trading method.
I suggest you learn to read the price action on the charts and employ the price action based strategy that I teach, as this is the simplest and most “accurate” way to trade the markets. You do not need to cover your charts in messy indicators, this only works to complicate the entire trading process.
If your 2018 trading performance did not turn out how you wanted, there is only one thing you can do; learn from it and move on. There is no sense in fuming over “what might have been” and rehashing past mistakes over and over. Just learn from your mistakes and grow as a trader, use them as a tool to better yourself, don’t let them pull you down though.
Hopefully, the ideas and insight included in today’s lesson will give you the kick-start you need to tackle 2019 with a clear head and the proper trading mindset. Remember, large goals such as “becoming a successful or profitable trader” are not obtained overnight or all at once. Instead, they are the culmination of many smaller goals that you worked diligently to complete. Any lofty goal must be broken down into smaller, “consumable” pieces that are more realistic and measurable on a day to day basis. Hopefully, the lessons I have brought to you this year on this blog and that are explained further in my professional trading courses, will give you the ability to master each aspect of trading that you need to become a profitable trader.