Traders: Understand This About Goal-Setting
The market pulled back a little today on the
kind of light volume that would be expected during a holiday week. I’m not
seeing any major cracks appear, yet. Therefore I would continue to focus on the
long side, but beware that a substantial pullback has not occurred for some
time.
The New Year gives traders a
chance to wipe the slate clean. Whether 2004 was a good year, a bad year, or
somewhere in between, when the bell rings at 9:30 on Monday morning your
year-to-date return will read 0.00%.Â
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 some of the
goals I set for myself:Â
1)Â Â Â Â Â
I will be prepared before the bell
rings each day so that I may best execute my strategies.
2)Â Â Â Â Â
I will execute my trades as they
trigger, as all the thinking will have been done ahead of time.
3)Â Â Â Â Â
I will not enter trades that do not
meet my criteria.
4)Â Â Â Â Â
I will set protective stops on all
trades and honor them.
5)Â Â Â Â Â
I will systematically execute my trade
management rules, taking profits not on a whim, but only when my rules permit.
6)Â Â Â Â Â
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)Â Â Â Â Â
I will continue to learn so that I may
expand my trading and become an even better trader.
Sector Action
In Wednesday’s column I pointed
out the pullback in HHH and suggested it looked like the uptrend was ready to
resume. If you took an HHH trade on Thursday, you may want to start looking to
take some profits.Â
Today’s pullback in the broad
indices has helped to begin working off short-term overbought conditions. It’s
always nice when this happens without a sharp selloff. We’ll have to wait and
see if things change tomorrow.
Biotechs and the Dow have been
strong recently while Drugs and tech have lagged.
Rob Hanna