How to Create 2020 Trading Resolutions You’ll Actually Stick With
The beginning of a new year not only marks a reset of the fiscal calendar, but it is also the perfect time for traders of all types to begin reevaluating their current trading strategies. With a year of additional data in hand, traders will look to make adjustments, employ the use of new technical indicators, and find creative methods for improving their annual bottom line.
Creating resolutions for the new year—regarding finances, fitness, or anything else—will help increase the likelihood of making some meaningful changes in your life. However, resolutions alone will not be enough. When creating a roadmap for the upcoming year, it will be crucial to choose a set of goals you’ll actually want to stick with.
Even if you weren’t able to achieve last year’s trading resolutions, the new year will still give you the chance to start again from scratch. By making just a few adjustments to how you generate your goals, you may be able to transform your overall approach to the market (for the better). In this article, we will discuss how you can create productive trading objectives.
Choose Trading Objectives that are Measurable
While many traders will have a broad trading resolution such as “make more money” or “increase return on investment”, selecting resolutions that can be quantifiably measured will still be absolutely necessary. Instead of simply aiming for “more” of something—which can be rather abstract and up for interpretation—you should choose specific benchmarks that will make it easy to determine whether your efforts were successful or not.
Rather than trying to “increase return on investment”, resolve to increase return on investment by five percent per year (or whatever figure you deem appropriate). Though you shouldn’t necessarily consider anything short of your goal to be a failure, having a firm figure in mind will make it easier to make trading decisions over the course of the year.
In addition to choosing goals that are measurable—and keeping with the SMART Goal model, in general—it will be important for all traders to be realistic with their expectations. In addition to fear, greed is one of the biggest psychological risks that every trader will face. If your earnings objectives are unrealistic (doubling your money in one year is a lot more difficult than some think), your exposure to risk will inevitably become unmanageable.
If it is your second year trading, setting realistic expectations should be a bit more straightforward. Now that you have some experience under your belt, you’ll be able to see if your trading outcomes have relatively increased or relatively decreased. But even if you’ve never traded before, there are still some basic benchmarks you can use to develop expectations. One common benchmark for stock traders is the S&P 500 Index. If your active strategy outperforms a standard index fund, you’ll have a reason to be proud.
It has long been said that patience is a virtue and, as cliché as this saying might sound, this claim is certainly justified. Without patience, it can be easy for any trading strategy to quickly run into problems. For example, if you have just begun using a new technical indicator, opening with three straight losing sessions may have you feeling a bit pessimistic. If a stock has been losing value, it can be very tempting to abandon your current position.
Lacking patience will cause traders to be governed by fear (fearing their positions will get even worse) and ultimately end up selling low and buying high—the exact opposite of what all traders ought to strive to do. Bearish markets do occur; stocks will experience occasional value decreases. Instead of expecting to achieve your trading objectives overnight, you’ll be better off letting your positions develop naturally on their own.
Utilize Multiple Technical Indicators
There is no denying that at the heart of every worthwhile trading strategy, you’ll find several “go-to” technical and fundamental indicators. These indicators enable traders to identify trends, predict future movements, and justify their decisions to enter into or exit out of a given position.
While there is no need to go overboard with using technical indicators, it will be a good idea to use a mixture of lagging and leading indicators. Lagging indicators illustrate what the market has already done while leading indicators illustrate what the market might do. As you might expect, both these types of indicators can play an important role. If you have never used trading indicators before, the relative strength index (RSI), moving average convergence divergence (MACD), Ichimoku Cloud, and Bollinger Bands are a few of the indicators you may find useful. Following events in the news (fundamental analysis) will also help make your approach to trading a bit more dynamic. Before relying on any technical indicators, be sure to begin by test your new strategy on paper.
Stick to Your Core Trading Principles
Many traders hope to find the “magic secret” for executing successful trades. While there is seemingly an infinite bounty of things you could learn about the trading world, it is still okay to count on your core principles to guide you along. In fact, trading—in general—is much more graspable than many people initially assume.
One of the most important core principles for all traders to remember is diversification. No matter what you might be hoping to accomplish as a trader, pursuing a more diverse portfolio will be one of the surest ways to reduce your exposure to risk. Trading indexes, experimenting in different markets (stocks, forex, cryptocurrency, etc.), and using an eclectic mix of long-term and short-term positions are all ways your trading strategy can become diverse. As long as you are willing to take active measures towards balancing risk and reward, your trading goals will remain within reach.
Conclusion – Trading Tips for 2020
While the road to successful trading may not be paved with many shortcuts, there is still plenty that you can do to improve your pursuit of market success. Each new trading session (whether you are looking at the market from a daily or yearly perspective) will give you an opportunity to make positive financial progress. By keeping these simple, yet valuable, tips in mind, 2020 should be your best year yet.