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New Year – New Trading Plan

New Year – New Trading Plan
January 13
22:35 2012

Ready or not, 2012 is here. After all the celebrations have ended, it will be time to get back to work and face the financial markets again. As many of us are accustomed to doing this time of the year, we reflect on the successes and challenges of the past year, and look forward with a new set of resolutions. It is not uncommon to find that many people will make resolutions to eat healthier, manger their time better, develop closer relationships with loved ones and so on. In this article we will give a few ideas to consider putting on your list this year that could tremendously help your trading career.

Learn something new.

It is 100% guaranteed that the markets will not trade exactly the same as they have in the past. Every day will be a new adventure and traders must be willing to let the market teach them. The market primarily teaches through price levels. Success in day trading is centered on learning how to be a good follower of the markets but accurately assessing current price to project future prices.

Plan your trades and trade your plan.

No matter where you are at in your trading career, novice, intermediate, or advanced, it pays to face the financial markets with a plan. This plan can be based on technical analysis, fundamental analysis, or just plain intuition. No matter how you develop your strategy it is important to stick to it. The market will test your strategy. When you receive this feedback, you must be willing to tweak and make adjustments to your plan.

Aim for small losers and big gainers.

The fundamentals of any trading strategy should include two aspects: managing risk and taking profits. Practice being a cold blooded seller when the markets begin to turn against you. If you can limit your losses, this is half the battle. When your strategy works and your trades go in your favor, have the patience to let the trade develop and let the market reward you.

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Maintain a balanced mental state.

A trader’s psychology can make or break a successful trading career. Traders have to master their emotions and learn to trade with their mind and not with their heart. Emotions such as fear and greed, when left unchecked, are detrimental to any trader and will undermine their ability to think objectively about the markets. Without objectivity a trader is bound to misinterpret the markets and make costly mistakes.


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Today’s Day Trader Strategy

One of the most common and destructive mistakes a day trader makes is to simply not follow their plans. Temptation, an “obvious signal”, and just simple greed can lead traders down the road of being undisciplined. This is without a doubt one of the most dangerous mistakes, as traders will often lose more than they originally planned as they raised their amount risked.