New Years Resolutions for All Traders

Happy New Year to all of you.

Here are your New Years Resolutions. If you keep to them you have a MUCH better chance of being a successful trader.

1. Set a stop-loss at the point where you know that what you predicted to happen is definitely wrong.

Reasons: You know your downside, and you decide where it is when you are calm. So many times I hear traders saying they don't use a stop loss if they are there and watching the price. This is a rookie error. When a position goes against you, you are NOT in the right frame of mind to make the decision to cut your losses, so make that decision beforehand.

2. Don't put too much money on a single trade. 1-2% of your account should be the max, ESPECIALLY if you are relatively new to trading.

Reasons: It is is easy for anyone, including a very experienced trader, to lose 5-10 trades in a row. If you are trading a lot, then this situation WILL happen to you, based on probabilities alone, no matter how good you are. If you are using 10% of your account for each trade, do the math. Additionally, trading on margin means that you may be stopped out on a margin call before even hitting your stop loss level. Use something like the Lot_Size_Calc indicator to make sure the size of your trade is correct for your risk appetite.

3. Look for CONFLUENCE every time. Confluence is when you have several reasons to take a trade.

Reasons: If you like trading, it is VERY HARD to make yourself be patient and wait for the right trades to come along. You get caught in situations where you WANT to trade and you have maybe one indicator or one Fibonacci level or one supply/demand level showing you an opportunity, and it is soooo tempting to trade. One reason each time is not enough to see you right over a long period of trading. It's that simple. Even though I like my customised indicators (like the Blocks indicator pictured, which is free to our subscribers), I would NEVER use just one indicator to trigger a trade. A useful trick is to imagine you are allowed only one trade each day, or three each week, and ask yourself if there might be a better opportunity out there and you are on too much of a hair trigger.

4. Get a bias and stick to it. In general, the trend is your friend. No bias? No trading then.

Reasons: While it can be hard to choose a bias, it is always going to be better to go with the flow. Imagine the trend as a river. Swimming against the flow is ALWAYS harder. Instead of picking tops pick pullbacks. Never take a short trade if your bias is long. You feel way more of a dumbass getting a trade wrong if your bias was the other way. This post doesn't cover how to choose a bias, but ALWAYS have one. If you can't choose a bias, then don't be trading till you can.

5. Keep a trading journal. Write down each time you consider a trade, whether you take it or not. Just a line in a notebook takes seconds to write.

Reasons: After a month (actually after maybe 30 decisions), go back and see how each trade worked out, both the ones you took and the ones you didn't. You need a decent sample to learn anything, but it can be very educational indeed. You should probably have at least a 2:1 ratio of "no trade" to "trade", for a start, and do record the P&L of each trade, whether you took it or not. Unless you have a trading guru by your side, you are going to have to mark your own homework, so DO IT!

I wish all of you a happy and prosperous 2022!