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There is now just a single week remaining in the year. For all of us, 2020 has had many surprises. This week is Christmas, which means many major markets worldwide have closed for at least a day, and they will once again close for New Years’ a week away. In the meantime, price action will probably be slow and choppy, no matter which markets you engage in, as many institutions are on auto-pilot mode while taking advantage of time off. Are you taking time off? If so, how are you reflecting on your trading over the past year?
After such a year, who doesn’t need some time away from the screen? There are many things that traders may be thinking of in terms of time away from the markets. However, one vital element should be a year-end reflection.
Let’s face it, to live healthily, we all need periodic reflection for our wellbeing and for the benefit of personal and business relationships we have. The end of the year offers us a prominent time on the calendar each year to take a step back and assess how the previous year has aligned with expectations. As traders, we must be willing to come under self-scrutiny from time to time, no matter how successful we are.
I recall that in some of my first years of enjoying winning trading, I probably earned too much too soon. As a result, I assumed my gains would last forever, and I failed to assess and innovate my trading style properly. Eventually, my hot streak ran out, and I had to reflect as a necessity.
How should traders reflect during this time? There are a variety of ways. Each year, we should have some life goals. Whether trading is a primary vocation or a secondary money maker for us, or even a hobby, we should have goals. The end of the year is the primary time to assess how we obtained our objectives. It is also a great time to think about where and how we might have failed.
One right way of self-assessment is to keep a journal throughout the year. If you don’t, you can still look back over trading statements from your broker to assess yourself. What were your most profitable days, weeks, and months? What did these periods have in common? What can you learn about your trading from examining these hot streaks?
Alternatively, what were your losing days, weeks, or even months? What do these have in common? Was volatility different? What might the markets have been doing differently? Or, just as important, what might you have been doing differently during those losing spells?
Other pertinent questions to assess are; which markets did you perform better in, and of course, in which markets did you underperform? Is there any reason why you fared better or worse in one market as opposed to others?
Another primary tool for assessment is which times of day was your trading most or least successful? I find this to be very vital for day traders looking to enhance their productivity. Usually, it’s not difficult to see this pattern and determine why you may be more or less successful in a time of day.
One last set of questions is to analyze your best and worst trades from the entire year. Once again, what is the commonality factor? Where might you adjust your trading to maximize and repeat your best trades? What might you do from a risk management perspective to protect your losses?
Life is all about adaption and self-improvement, especially when it comes to trading. It is very much a sink or swim type atmosphere; traders who are continually working to improve are the ones who will have long-term success.
In trading, one cannot maintain while being in a survival mode, but one has to thrive rather than merely survive. It’s rare that traders who barely keep their head above water or only making ends meet are likely to enjoy long-term success. Instead, there are extremes, either losing traders or those whose winnings improve year over year.
If you are looking for 2021 to be a better year, and I believe we all are, then you can take action now to dictate your future by taking this time to reflect, analyze, backtest, and assess further. Remember, if you are going to make money, you’ve got to do the work!
Happy New Year!
