The end of another trading year means we gotta look back on our trading decisions to determine areas of improvement!
I managed to corner the FX-Men for their hard-earned lessons and saw at least three common themes this year:
Trade what you see and not what you think
Being confident in your biases is important in risk management. After all, it takes a certain level of confidence to stick to the plan when the market isn’t playing out your best-case scenario.But while there’s nothing wrong with using your biases to look for setups, irrationally sticking to them could spell trouble for your trades.
Just because prices are high, for example, doesn’t mean that they can’t go higher.
Consequently, just because prices are low doesn’t mean they can’t go lower.
Remember that the market is the judge, the jury, and the boss. Your job as a trader is to navigate through whatever the market is giving you to get the least risk and the most profits from each opportunity.
Be comfortable exploring other trades and assets
While forex and stock traders were busy guessing and second-guessing central bank decisions and COVID-19 restrictions, crypto bros and sisses made killings from E̶l̶o̶n̶ ̶M̶u̶s̶k̶’̶s̶ ̶t̶w̶e̶e̶t̶s̶ altcoins and other crypto assets mooning over the year.
Don’t want to miss out on the next big trade? Then don’t be afraid to explore trading other assets!
Remember that trading is a skill. If you know what you’re trading and have the discipline to follow your tried and tested strategies, then you can also make profits even if you’re not trading traditional assets.
Before you bet the farm on the first trending asset you see, however, you should also consider the next point:
No position IS a position
To successfully trade an asset, you must first have enough research and observation about it.
Have you considered different price scenarios? How will you manage your trade in case any of these potential scenarios played out? Has a similar event taken place in the past and if so, how did price react?
Until you’re knowledgeable about how the asset behaves and have back and forward tested a strategy, then you’re better off in the sidelines.
You can’t manage your trade’s risks if you don’t know what they are, right?
The next year – like a lot of trading years – promises to be an exciting one with central banks taking away stimulus and taking a closer look at other non-traditional assets.
Make sure that you’re updated on what other traders are looking at and how you can take advantage of potential money makers.
That’s it for our list this year!
How about you? What trading psychology lessons have you learned in the last twelve months?
Don’t hesitate to share your experiences and lessons!