The new year is a great time to sit down and set trading goals and objectives for the coming year. Whether you are trading Stocks, ETFs, or Forex, it is important to look at what has worked for you this last year and maybe what hasn’t worked so well. Then incorporate those ideas into your trading plan for the 2014.
Like anything important in life, we should set aside time periodically to evaluate our plan and refine it with our goals in mind. It is like reviewing your Will or Life Insurance Policy for your current circumstances. It is very difficult to evaluate something that is more concept than reality. So if you don’t have a written trading plan, now is the time to get one and make sure it is in writing. It has been said, “A goal not written is only a wish.” A trading plan not written down is only a dream, and dreams are good, but it is very difficult to trade on a dream.
When thinking of a written trading plan for yourself, you should consider something akin to a personal trading Mission Statement. Any business has a difficult time succeeding in the marketplace without clear goals and plans for the future, including some details. As an individual trader you need to look at your trading activities more like a business with clearly stated goals and objectives.
When we think of trading plans, sometimes we think our trading rules are our plan and, therefore, don’t need anything more comprehensive. However, I am convinced that you can have the best system available, the best trading rules, or the best indicators for your entries or exits, but, without consistent application of these rules, you will have a difficult time being successful. A system is not a trading plan; it is only a part of a trading plan.
You need to think of yourself as a trading business, not just a trader. And a trading business would include an overall look at your trading goals and objectives, trading routine, trading capital, etc. Also, in your trading business, you should be keeping appropriate records or a trade journal. In other words, I am referring to what and why, not just the how.
With the new year upon us, now is a great time to get started. Sit down and ask yourself some tough questions about your trading and how you think you can become a better, more consistent, trader and be prepared to write down some honest answers to those questions. When you identify areas where you can improve, include them into your specific action plans as part of your 2014 Trading Plan and be prepared to review these periodically.
One last idea is to share your plan with a trading friend or partner. This will help you become more accountable and give you more incentive to make the changes you would like to make and stick to those changes. Just like other new year’s resolutions, if you involve others in your goals, you will find that you may have more support to improve your trading.
So, in conclusion, sit down and write out a personal trading plan, including a mission statement, your trading goals, and your trading routine. Then share it with a trading friend, or mentor, and, most importantly, follow through and work your plan!