Trading Blog

Find an edge for your trading as we discuss tips and methods for maximizing your success.

To say that 2021 has been an eventful year would be an understatement. There have been plenty of highs and lows, with markets weathering storms and coming out on top. We saw inflation and cryptocurrencies hit long-time or unprecedented highs, while the equities market also had its fair share of twists and turns.

Whether you trade the Forex, stock, or cryptocurrency markets – or all of them – the factors that make one a good trader remain the same: consistency, discipline, and knowledge. A good trader is always looking to do better, so here are our top 5 trading resolution for 2022.

1 – Know Your Mistakes

Review your trading journal (if you haven’t already started one that’s another resolution to add to the list!) to see which trades were less-than-optimal.  While not every trade can be a winning one, mistakes can still happen, and usually do so often. Entering or exiting a trade too early or too late? It pays to review your trades to see what sort of mistakes you are prone to making – and correct it. Perhaps you are often tempted to hold on to upward-moving positions and ignore sell signals; or maybe you hold on to losers for far too long and exacerbate your losses. Most traders won’t recognise their own behaviours amid trading. It’s only by looking back at the trades made that you see the patterns.

2 – Correct the bad habits

Humans are naturally wired to avoid pain. Sometimes, that means avoiding closing a losing position with the hope that things might swing the other way. While fortunes might reverse, clinging on to a losing trade can result in severe financial losses in a bear market, and that’s bad risk management [link]. Set your stop loss with a particular goal in mind: whether it’s a percentage that works within your risk threshold or a level of support that you think might signal a continued downturn. As we’ve repeatedly mentioned, successful trading is making consistent profits in the long run, and the only way to do that is by sticking to the rules of a trading plan.

3 – Improve your skills, especially in areas that are lacking

Do you focus heavily on technical analysis when making your trades? Now is the time to resolve to look more closely at the fundamentals too, even though technical analysis assumes the intrinsic value is already priced in. Even for technical traders, an understanding of the fundamentals can help forecast macro trends and prevent ticking time bombs where the majority is wrong. On the other hand, fundamental traders can also benefit from increased technical knowledge. Improving your skills in applying and analysing indicators [link] and charts can help with making short-term trades and increase confidence when picking entry and exit points.

4 – Prepare for uncertainty

While this sounds like the obvious thing to do at all times, 2022 is set to be, if anything, volatile. While 2021 has been eventful, the start of 2022 is going to require an even more watchful eye. Central banks that have been hoping to take on a more hawkish tone and ease on economic stimuli now face the fresh hurdle of the omicron variant of the coronavirus. In addition, the repeated back-and-forth on whether the current high inflation will be “transitory” means no clear picture has emerged yet. Now is the time to diversify your portfolio, brush up on the risk management, and strap in because we’re all in for a bumpy ride in the financial markets.

5 – Keep those resolutions!

At the risk of being self-referencing, keeping to a resolution might be the most important one to make. After all, there’s no point in making a dozen resolutions if none of them is followed through with. According to a piece of research done by Stockholm University, framing your resolution as a goal to approach is significantly more effective than resolving to avoid something. For example, instead of resolving to be less emotional when trading, resolve to ask yourself if you are following your trading plan each time you make a trade. It also pays to have clear, specific goals in mind. Instead of saying you will brush up on your technical analysis skills, maybe have the goal to learn a particular indicator each week and try to implement them in your trading strategy – perhaps by testing them out in a demo or cent account [link] first.

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5 Trading Resolutions to Make for 2022

1 – Start a Trading Journal

If you don’t already have one, a trading journal is invaluable in helping you identify patterns, strengths, and weaknesses in your trading.

2 – Know Your Mistakes

Do you often find yourself holding on to bad positions in a bear market? Review your trades to see what sort of mistakes you are prone to making.

3 – Correct the bad habits

Resolve to stick to your trading plan – exit and enter positions based on your pre-determined signals and not how your feel about it.

4 – Improve your skills, especially in areas that are lacking
Both technical and fundamental analysis are complementary – it pays to master both.

5 – Prepare for uncertainty

2022 looks to be tumultuous – manage your risk well!

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