Accomplish These And 2004 Will Be A Profitable Year

  • December 29, 2003
  • Rob Hanna

The
New Year gives traders a chance to
wipe the slate clean. Whether 2003 was a good year, a bad year, or somewhere in
between, when the bell rings at 9:30 a.m. ET on Friday morning, your year-to-date
return will read 0.00%.

This provides an excellent opportunity to review your trades
and analyze your own trading performance on a personal level. Look at your trading
diary. (You all have it in one form or another, right?) What did you do well
this year? What do you need to improve upon? What did you learn? Based on what
you’ve learned in the past year, if you had it to do over again, would
you be able to significantly improve your performance? After analyzing the past
year, it is time to set some goals for the upcoming year.

One thing traders must understand when setting goals is that
even if they get better at trading, that doesn’t necessarily mean their
returns will go up. Once you’ve found a trading methodology that you’re
comfortable with, and feel you are capable of executing, all you can really
do is execute your trades to the best of your ability and take what the market
gives you. Some years the market will perform in a way that is favorable to
your strategies. Other years will be more difficult to make money. This is true
of any investment strategy. So rather than saying you want to return 10% more
than you did this year, how about setting some goals that you can actually control?
(Yes, I understand that most people will still set goals of making X% anyway.
That’s ok — it can give you something to shoot for. Just focus your
energies more on the things you can control rather than trying to manage to
a number.)

I’ve listed below a few goals that you may use/edit/trash
or do with whatever you see fit:

  1. I will be prepared
    before the bell rings each day so that I may best execute my strategies.

  2. I will execute
    my trades as they trigger, as all the thinking will have been done ahead of
    time.

  3. I will not enter
    trades that do not meet my criteria.

  4. I will set protective
    stops on all trades and honor them.

  5. I will systematically
    execute my trade management rules, taking profits not on a whim, but only
    when my rules permit.

  6. I will do my best
    to identify whether market conditions are favorable to my strategies so that
    I may press in good environments and lighten up in bad ones.

  7. I will periodically
    (not too often) review my plan so that I may evaluate whether any changes
    need to be made.

  8. I will continue
    to learn so that I may become an even better trader.

If you are able to accomplish all of the above, there is no
doubt in my mind that 2004 will be a profitable year, no matter what the environment.
How profitable will depend partially on the market, partially on luck, and largely
on you.

I will not have a column on Wednesday, but will return to a
normal schedule again next week. I will give a more detailed market analysis
at that time, but for now I’ll just say the market looks good to me.

Lastly, I would like to wish a little of the luck part of the
equation to my friend “Baba”, who is “retiring” from
corporate life so that he may trade full time. I have no doubt he will be just
as successful in his “new career”.

Happy New Year!

Rob Hanna

robhanna@rcn.com