Putting Your Best Trading Foot Forward in the New Year

The new year can be just an arbitrary date on a calendar, or it can be a time to review, refine, and rejuvenate.

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https://tickertapecdn.tdameritrade.com/assets/images/pages/md/New year investment advice for stock traders.
2 min read

It seems as if the holiday season just started, but once again, the new year is upon us. January 1 may be an arbitrary date for making resolutions or setting new goals, but because of the nature of the financial world, it makes sense at the start of a new year to evaluate your investing and make any needed adjustments.

It’s also a great time to get a baseline on your performance in the previous year. If you aren’t already tracking your investment returns, you may wish to take some time to download your trade history and organize it into a spreadsheet. Then determine your performance and compare it to the performance of the overall market, as represented by the S&P 500 Index or another benchmark.

If you outperformed your chosen benchmark, congratulations. If you didn’t, don’t despair; even the best investors have off years. Regardless, there are goals you can set for the coming year that can help your performance.

Standardize your analysis process. The stock market is the ultimate noise maker, constantly throwing information at you from all angles. The more you standardize your stock selection process and filter out the noise, the more focused your analysis may be, and the better your trade and investment candidates could become.

Strive to be more patient and learn to say “no.” Learning to be patient and waiting for stocks to set up properly before entering them, and perhaps more importantly, being able to say “no” to stocks that don’t offer good setups, may help sway the odds.

Commit to cutting losses quickly. A large loss in just one stock can wipe out the gains in several others, which is why identifying and cutting those quickly can be a crucial part of any successful investing strategy. Just remember, before a stock loses 50%, it first has to lose 5%, then 10%, then 25%. The sooner in that progression you cut it, the smaller the impact may be to your portfolio.

Aspire to be more mindful in your trading. It’s easy to fall into bad habits and harmful patterns in the market. Even when you think you have eliminated them, they can slowly creep back into your process if you’re not paying attention. Being mindful can help avoid this trading trap, and it can be as simple as repeating your trading or investing rules out loud before the opening bell, or printing them out and hanging them over your computer so they are always at the front of your mind.

Give yourself a break. Making money in the market isn’t always easy. It takes hard work, discipline, and persistence, but even that doesn’t guarantee you’ll always come out ahead. If you find you’re underperforming in the coming year, don’t get down on yourself. Everyone, from the average investor to the billionaire hedge fund manager, can stumble from time to time. Take that energy you would otherwise expend beating yourself up, and refocus it on identifying what’s not working in your process and fixing it.

These are just a few ideas for goal setting. But no matter what goals you choose to pursue for yourself, just the fact that you’re actively reviewing and refining your trading means you’re starting the New Year off on the right foot.

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