Happy new year, faithful readers, traders and investors! It’s time to kick off a fresh 52-week set sure to be full of opportunities, surprises and moments that will test even the best of traders’ ability to stick to their trading plans.
Of course, while a new year comes with a clean investing slate, what you start writing must come from within.
The mental aspect of trading cannot be understated. So when it comes to your new start in 2014, walk into everything with a neutral mind-set. How well a trader manages to go with the flow, keeps emotions and opinions at bay, and lets the market tell him/her what to do often determines the P&L for the year.
By extension, how a trader gets through rough patches during the year is a direct result of how well he/she can remain in a neutral state of mind.
So starting today, forget how good or bad the previous trading year was. Check your ego, fear or doubts at the door. Then, embrace the uncertainty that lies ahead.
Patience serves as the linchpin that holds together performance in those challenging periods that will inevitably appear.
However, patience also is one of the most difficult things to master when it comes to trading.
Patience in trading means not rushing into any trades or over-trading when there are few or no viable trading setups. Regardless of what time frame a trader operates in, throughout the year one will encounter periods that are more challenging, so your self-control will be tested during those times. Patience sometimes means staying in cash and watching the market from the sidelines — a difficult concept, but something that the most seasoned trading pros know to do.
In the words of Chevy Chase in Caddyshack, “be the ball” and go with the flow of the signals that the market gives me. Don’t allow arrogance or opinions to get in the way of profitable trades.
Trade the Trend
Trading the trend — i.e. trading in the direction of the major trend in any market, as opposed to fighting the trend — is the easier trade. While staying the trend can be psychologically challenging, fighting the trend can wear a trader or investor out, leading to major mistakes and draw-downs in their P&L.
As a reminder and for perspective, the trend in U.S. equities remains up, the trend in gold remains down, and the trend in U.S. interest rates is up. These trends will remain so until broken, at which point the successful trader with the neutral mind-set will learn and quickly adapt to the new market environment.
Trade ’em well in 2014, and a I wish all of you a very happy, healthy and profitable new year!
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.