- Get your work/life/trade balance right
- Don’t just talk about it – actually diversify
- Know the economic calendar inside out
With 2015 drawing to a close, many traders are looking ahead to next year in hopes of either replicating their success or starting off with a clean slate. Regardless of their performance these past 12 months, it’s pretty safe to say that the New Year brings with it hopes of a better performance in 2016.
With this in mind, Nikolas Xenofontos, Director of Risk Management at leading online trading services provider easy-forex, has provided 10 New Year’s resolutions that traders of all levels should aspire to in 2016.
- Get your work/life/trade balance right
In order to succeed at trading (or anything, really), you need to get your priorities straight. This means setting aside sufficient time for work, life, and in the case of a part-time trader, trading. By making a resolution to spend enough time away from the screen, you are making a commitment to balancing and improving your lifestyle. This will actually help you focus on your trading goals, avoid distraction and maximize your time while you’re actually trading.
- Read more
A learned trader is a more informed trader, and being more informed may help you succeed. The only way to become an informed trader is to read more, and then apply what you’ve learnt. This means reading anything and everything related to trading: fundamental analysis, technical analysis, trading books and news headlines are just a few examples. The free to download easy-forex ebook, Top 10 Stock Indices to Trade in 2016, is a great place to start.
- Plan every trade
Every single trade you take should be carefully planned. Successful traders don’t trade on a whim. They assess the markets, anticipate upcoming events and monitor the trends to understand a solid entry point. Before you go long or short on anything, ask yourself if you planned your move ahead of time. If the answer is no, stop right there.
- Really diversify this time
Every trader knows they need to diversify their portfolio to limit risk exposure, but few actually do it. Take a long hard look at your trades this past year and ask yourself whether you actually invested in more than one or two asset classes. At the end of the day, diversification is to your benefit. Your ability to smooth out risks from your portfolio can often mean the difference between success and failure.
- You may trade the economic calendar
We all know that technical trading is the bread and butter of most successful traders, but that doesn’t mean they rely solely on the charts to pick winning trades. Today’s financial markets are more influenced by the economic calendar than at any time in recent memory. Economic data and monetary policy news matter. Your ability to react quickly to news events and predict the outcome may set you up for some positive gains. In 2016, endeavour to start each day by reviewing the economic calendar.
- Define your loss limit
What if I told you that successful traders don’t always pick winning trades? This happens more often than you think. The point is, losses are bound to occur in trading. Picking a bad trade isn’t the end of the world if you’ve defined your loss limit. If you’ve failed repeatedly, at some point you may need to stop trading and reassess your strategy. What’s the maximum loss you can absorb? Figure it out. That’s your loss limit.
- Try something new
A lot of traders don’t diversify because one or two asset classes are all they know. As a trader, it’s important to dip your hand in different markets from time to time; this will not only help you diversify, but also may capitalize on opportunities provided by other markets. By the end of the year, you should be comfortable trading at least one other asset class. Remember to approach new asset classes very conservatively at first. You may consider trading in a demo account before you put down real money.
- Draw trend lines
Being a trader in the digital age is amazing because you have literally dozens of charting tools available at your disposal. Whether you specialize in forex, stocks, commodities, options or any other asset class, there’s free charting software out there for you. Setting up daily charts, drawing trend lines and performing technical analysis should be performed every day.
- Identify warning signs
As a trader, you’re actively engaged in trading. You’re not keen on simply cost averaging index funds year after year. You want to participate in the markets and make multiple trades on a daily or weekly basis. In that case, you need to learn to identify the warning signs. Using tools like the MACD may help you identify trend reversals so that you can respond quickly and effectively.
- Be profitable
Remember, the purpose of trading is to make money. At the end of 2016, you will have hopefully made more money than you lost. So before you dream about millions, ask yourself whether you’ve broken even in a calendar year, let alone made a handsome profit. Being conscientious about the bottom line will keep you focused and motivated. It’ll also teach you to master your trading psychology. This goal is so simple but so fundamental to trading. Don’t lose sight of it!