By Rob Colville on December 6, 2017 in
It’s a little hard to believe that the calendar has already turned to December, isn’t it? Indeed, with the holiday season looming and only a handful of trading days left before we close the book on our 2017 trading year, now’s the time when we look back, as well as think ahead and begin charting our course for 2018.
This trading year in review is going to be a bit different, however. That’s because we want to take the focus away from what happened in the markets, and look squarely at how you fared in your trading—and perhaps more importantly, consider why.
That’s because by now, we know all about the most popular news stories, everything from Brexit developments in the UK, to a Trump presidency in the US, and the inevitable central bank policies and geopolitical tensions that increasingly drive world equity, currency, and commodity markets. So instead, what we hope to evaluate today is what you, specifically, did well this past trading year, what you still stand to improve upon, and the most valuable skills and lessons you want to carry forward from one trading year to the next. Here’s how to get started…
For most traders, there’s never a point during the trading year when they don’t know whether they’re up, down, or flat as far as monetary performance is concerned. Many track their win rate closely as well. But as we’ve written before, P&L and win rate alone don’t tell the true story of how well you’re trading.
What if, for example, you’ve traded profitably overall, but feel like you’re exiting winning trades too early? Or maybe you’ve even knowingly broken some trading rules this year? It’s possible that those choices didn’t result in devastating losses, so your win rate and P&L alone won’t reflect the error of your ways.
That’s why we instead suggest assessing your performance from the trading year that was using factors like the ones below, all of which should be tracked (or at least reviewable) by examining your regular trade journal entries:
Did you consistently trade within the confines of your trading strategy from start to finish, including analysis and trade selection, risk management and execution, and ongoing trade and money management functions? Or did you bend or break some rules, perhaps take a non-qualifying set-up or two, or maybe move a stop loss when you know you shouldn’t have? And be exceptionally honest as you rate your plan compliance. Even the world’s best traders aspire for 95%-98% compliance, so it’s understandable if you still have some work to do in this category. It’s really all in the name of improving as a trader.
Your Best Trade
You probably remember your best trade like it was yesterday. So what pattern was it that seemed to jump off the screen at you? How did you structure your position using clearly defined reward/risk parameters? And do you recall the confidence and decisiveness with which you planned and executed the trade? Reflecting on your best trade(s) in this manner is helpful, because it may exemplify what effective trading should look and feel like for you, starting with the pattern(s) and set-up(s) you trade (and don’t trade), and how you execute and manage them. From here, it’s often possible to simplify your trading, eliminate extraneous trades or unproductive steps, and become a better and more efficient trader.
Most Improved Skill(s)
The end of a trading year is also a great time to recognize the progress you’ve made. So could you feel yourself getting better at a particular function, like identifying and trading pin bar reversals, for instance? Whatever it is, take a little time to write down the achievement, and maybe a few words about how you got there. That’s an example you might follow in the trading year to come as you set your sights on continued improvement and any new skills you hope to develop.
Trading Lessons Learned
Even if your most memorable lessons from 2017 were about what not to do, or lessons you learned the hard way, that’s information you can put to good use in 2018 and beyond. So recap your 2017 trading year, own up to any mistakes, and if you discovered anything about yourself or your trading, write it down and make a commitment to following the rules and trading smarter in the year ahead.
In part because traders and institutions tend to trade less heading into the holidays and year-end, December is traditionally a slow month for trading. And even if you’re taking some time away from the markets and enjoying family time this season, be sure to assess your 2017 year in trading, and establish (non-monetary) goals and objectives for 2018, too.
A new year means a fresh start, so be sure to recharge your body and mind, leave negative emotions in the past where they belong, and document not only what you hope to achieve in 2018, but how you intend to do it…and be specific in both cases!
Maybe you want to tighten up risk, or do more to protect rolling profits, or maybe even incorporate a new pattern into your arsenal. How will you go about it? Perhaps by adopting a more active, or “combative” trade management strategy, or attending a trading conference, or by working with a mentor or trading coach to develop your skill set. Whatever you choose, be committed to it, and here’s hoping you close out 2017 strongly and make 2018 your best trading year yet!