New Year’s resolutions for traders and investors

  1. sun-saluteAttend to your body. Make exercise and nutrition a priority, so you are calm and alert. No matter what the markets and life are doing on a given day, you know one thing, you’ll be in your body when you face them. Making sure you are sharp-witted and unshakeable is the one thing you can always control. So control it.
    You don’t have to do anything fancy. Take a little walk. Do a Sun Salute; yoga has been shown to improve brain function. I have an app on my phone that guides me through an increasing number of pushups (I started with one and I can do 25 now).
    And to make it a priority, do it first thing in the morning. You’ll start the day with a personal victory and feel great.
    Notice that I didn’t say diet. It’s a horrible word. Try “nutrition,” instead.
    No really, try it now. Say, “I’m on a diet.” And now say, “I make sure to get good nutrition.” Which feels better?
    Another difference is that instead of worrying about how you look to others, you start to enjoy how your body moves and feels. That’s vital, especially in a job that involves the highly unnatural act of sitting in a chair staring at a screen for hours.
  2. Start with gratitude. Whether you day trade or you’re researching longer-term investments or trades, first take thirty seconds to write down three things you are thankful for. Thank youIf it’s hard to think of any, start small, ridiculously small—but true. I’m thankful for my new shampoo. I’m thankful I filled up gas yesterday.
    Start trading with an attitude of abundance, not scarcity. Good things are flowing towards you in an endless stream. All you have to do is get out of their way.
  3. Do not overtrade. Take breaks, step away. There is always another opportunity to profit. Part of an abundance mindset is knowing that opportunity is in limitless supply as well. You’ve heard the old sayings: Standing aside is taking a position. When in doubt, stay out.
  4. Don’t trade in times of family crisis or emotional stress. I learned this one from our friend Marty “PitBull” Schwartz, one of the original Market Wizards. Here’s the famous video.
    run-awayActually, I learned this a few years ago, the hard way. After a profitable spring and summer, I was ready to take the rest of the year off. Then I had an argument with a loved one and sat down to trade the next morning. I very quickly had to change my plans for the rest of the year. It was demoralizing, far beyond the change in my account balance.
    Don’t use trading to hide from life. You are capable of dealing with the rough spots. And the markets will be there once you’ve taken a step towards resolving whatever conflict is going on.
    There’s always going to be conflict in a world of unique individuals. The trick is not to let them make you lose focus and lose sight of the big picture. (You do know what the big picture is, don’t you? Hint: it’s not money.)
  5. Always use stops. Yeah, yeah, “tell me something I don’t know,” right? But if you’re like most people (and me) too often you set a stop and then find some reason to move it. And then you look back after the loss and you can’t even remember how that reasoning ever made sense. Sound familiar?
    trader regretPlan your stops before you buy or sell. It’s part of the work. Then do the math. It’s cheaper to get stopped out and lose the commission than to lose another tic. (If your commission is more than tic value, maybe you should talk to your broker.)
    Do it in simulation over and over—getting out with the small, controlled loss—until it becomes instinct. Until you don’t feel a pinch of regret but the calm of relief.
    Pay the commission. It’s the price of the ticket. It’s cheaper than staying with a losing trade that is no longer satisfying you.
    While you’re doing the math, calculate this as well. Don’t just compare the loss to zero, the cost of standing aside. Compare it to the gain you could make being on the other side.
    Hands up if you’ve ever looked back at a losing trade and then thought about how much you’d have made if you had just reversed your position? It’s easy to do the math then. The trick is to do the math when it can still save you.

It’s worth remembering that part of the reason you take the loss is because some part of you, deep down, still thinks you don’t deserve the money.

That profitable trading is something other people get to do consistently and you only get to read about and experience occasionally. You’re still on the outside with your nose pressed against the window.

If that’s even a little bit true, then go back to resolutions 1 and 2. Get yourself physically energetic so you are calm and alert and at peace.

Then focus on gratitude and the abundance you already have. Say thank you for even the tiniest things: a good parking space, a smile from a stranger, finding money in a pants pocket while doing laundry.

Only from an abundance mindset can you watch money go away from you, in the form of a controlled loss or an act of charity or any expenditure, and immediately be able to say with sincerity and enthusiasm, “There’s plenty more where that came from.”

Here’s wishing us all a healthy, abundant, profitable, and happy 2014. It’s going to be fun.

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