It is October 1 as I begin writing down some thoughts to share with you. Today is the first day of Q4, and if you’re like me, you find yourself looking back on the year so far—especially those tough summer months—as well as looking ahead to year-end trading conditions and hoping to finish the year strong.
Although the markets keep changing, year-end trading tends to feel similar year in and year out. The opportunities are different, but the thoughts and emotions remain largely the same. You reflect on the good trades (and maybe regret the bad ones), and you think about what you still want to achieve, whether it’s adding new set-ups and skills to your arsenal, or squeezing out a few more winning trades to help your bottom line.
So what are your year-end trading goals, and perhaps more importantly, do you have a calculated plan for reaching them?
As it happens, I have a few goals in mind that I’d urge you to consider. They are broader than just “Make as much money as you can,” but they are all well within your grasp, too. Reaching them will give you a nice sense of achievement as you close out what’s been a hard-fought year in the markets, and even more than that, will help put you on a profitable path for 2015 as well.
Year-end trading conditions make it all-the-more tempting to try something “just this once” in order to book a big profit, recoup previous losses, or make up for a missed trade. Afterall, one big winner might make your whole year, right?
Well, it’s nice to think about, but you know better than that! In reality, trading with money in mind is never a good idea because it can quickly result in a disastrous losing trade from which you can’t recover between now and year-end.
Now more than ever, be supremely committed to taking only the highest-quality set-ups that “follow all the rules,” and don’t risk more than 1% of your total account capital on any given trade.
Actually, you might even consider trading smaller size during the year-end trading period, or require a higher reward/risk ratio to qualify set-ups. All that will help protect your hard-earned capital at a time when you can ill afford to see large sums disappear because you decided to gamble instead of stick to your proven trading plan.
Remember the dreaded “summer doldrums,” the period of stagnant price action and low volatility that confounded many traders for months on end? Well, unfortunately, we haven’t seen the last of that this year! That’s because year-end trading is infamous for it, with traders all over the world busy preparing for the holidays and spending more time outside the markets.
Breakouts turn into fake-outs more often than not in low-volatility market conditions, and that will make high-probability range strategies especially important for year-end trading. Fortunately, that’s barely any departure from what we’ve been doing for much of this year!
Regardless, risk is high when volatility is low. Sure, we may get some short-term momentum breakouts on the heels of economic news and data, but there’s likely to be less of that in year-end trading as well.
In all, it’s easy to get whipsawed if you’re in the wrong place at the wrong time, and that makes staying the course, trading end of day, and even staying out of the markets all part of a successful year-end trading approach.
With that being said, year-end trading will quickly give way to the start of a whole new year, so now is also a good time to think ahead a little. What are your trading goals for the year ahead, and how will you achieve them? Also, what are your weaknesses, and how can you minimize or turn them into strengths?
Undoubtedly, you’ll rely heavily on your trade journal to assess how you’ve been doing, lay out your future goals, and track your progress with each new trade. Hopefully you’ve been keeping a proper trade journal and regularly analyzing the data, but if not, definitely make that one of your year-end trading goals!
See related: Must-Have Components of Any Trade Journal
In the markets, 2015 could bring a whole new set of opportunities and challenges for traders. Given the likelihood for rising US interest rates and tighter monetary policies by the Federal Reserve, the US dollar (USD) could strengthen against a host of world currencies, including the Euro (EUR), British pound (GBP), the commodity dollars, and more. So, needless to say, be sure you’re ready to capitalize on any such opportunities!
Now is also as good a time as any to refine your existing skills, and to develop new ones, so at least consider taking a forex course, attending a trade show, or working with a mentor. Many traders step away from the markets during year-end trading, but that doesn’t mean they stop trying to improve. Use your trade journal and your results and tendencies from this year to determine the area(s) that could use some attention, and then act accordingly.
As the old saying goes, “Time flies when you’re having fun,” and in year-end trading or at any other time, that’s what lifestyle trading is all about. Still, at this time of year, it’s only natural to look back on what was, as well as look forward to what may lie ahead. Perhaps this is yet another way that trading often imitates life!
Be very certain that you put the year-end trading period to proper use, though. This isn’t “crunch time” where you have to take big risks trying to make or salvage your year. It’s a time to rely on sound strategy to finish the year strong, and possibly disconnect for a while to work on some new and existing skills, enjoy the holidays with friends and family, and charge up your batteries for another year trading the markets!