Top Trick of the Trade

With this year coming to an end, now it is time to reflect and get ready for the new year. With most funds and individual investors swimming in red ink, we need a better plan for the future. We need a plan to improve our performance, recover losses, and reach for higher profits.

Now is the time to put together your strategy for the coming year. Begin by reflecting on the last year in order to identify the biggest issues that kept you from achieving success.

I highly recommend you take my “five largest losses” test:

• Locate your five largest losses and see what your account would have looked like if those trades were never made.

• Indentify what exactly turned those trades into the largest losers.

Knowing what caused you to underperform will help you avoid those kinds of pitfalls in the future. Cutting them out will put you on the path towards making money sooner than you realize!

We can set two types of goals: for the outcome or for the process. An example of an outcome goal would be to say “I want to bench-press 200 lbs”. An example of a process goal would be to say “I want to become a strong weightlifter.”

You can see immediately that you can control the process – go to the gym often, stop smoking, cut down on drinking. You can become a stronger weightlifter. The “outcome goal” is much less under your control. Maybe your build allows you to bench only 180 lbs – or maybe you can go up to up to 220. If you get the process under control, the outcome will take care of itself.

Now let us apply this concept to trading.

You may have an outcome goal of a 50% profit on your account in 2009 – but setting up this goal will not help you reach it. Instead, you need to focus on the process. This means you must establish your trading rules.

For example, you may decide that you will buy only trending markets. In that case, you need a set of rules for defining a trend. You better have those rules spelled out before you buy. You may decide you will trade only in flat trading ranges. If that is your choice, you need a set of rules to define them.

Whenever a client tells me he is not having the success he wants, I proceed to analyze his account. Without exception, I find that he buys and sells in a helter-skelter manner. What I always do as a traders’ coach is help each trader develop a plan. This plan will change and grow as the trader gains experience, but he must start out with a plan – how he will conduct his trading process.

Patience and discipline are essential for your success – and having a plan of action manifests that you have these qualities. Let us keep this in mind as we go looking for opportunities in 2009.

I wish you success!

Kerry