This post gives 14 actionable ideas to dramatically improve your stock trading performance in 2020.
Be forewarned. This is a long post. Take your time going through it. Bookmark it for reference. I believe that if you take these ideas and truly implement them, you’ll begin to see and feel positive results in a very short time.
1. Purge Financial Media from your Life
Financial media is a silent killer for many aspiring traders. Answer this question honestly. When was the last time you got a bright idea from the financial media that made you a meaningful amount of money? Very few right. For the most part, the good ideas are played out by the time they hit the TV. Consuming the financial media holds you back in 2 ways. First off, it plants a seed of doubt in your mind about your own original ideas. If you are bullish XYZ and have a position, then you hear bearish comments on TV, the seed is planted. You’ll be thinking about those comments when you evaluate your position. Second, it is an incredible waste of time. If you watch just 2 hour-long shows a day that’s 10 hours a week. For many of you, I suspect much more. How much better would your trading be if you studied charts or reviewed your trades for an extra 10 hrs a week? Too much? Devote half the time to work and half the time doing something fun with the family. Once I eliminated most of the TV voices from my head, my trading took a turn for the better. Still not 100% there, but working on it.
2. Create and follow a solid morning routine
Getting off to a productive start sets the table for a good day of trading. I suggest choreographing nearly every activity from the time you wake up until the opening bell. Start the coffee, eat breakfast, check futures, determine the key levels and trade plan for your go-to instruments, market moving news review, earnings gaps…..what ever it is. Allot a certain amount of time for each task and stick to it. Keep doing the routine until its automatic; like brushing your teeth. When the bell rings you’ll feel empowered because you’ll be prepared.
3. Visualize ( Fake it ’till you make it )
I am a big fan of visualization. It’s helped me so much in my business life and now in my trading life. Picture in your mind’s eye what your “professional trader” looks like. What is he/she wearing, how is the trading desk organized, how does he manage risk, who is he accountable to, what do the trading plans and trade records look like? Re-visit your “professional trader” visualization each morning before you start your trading day. Emulate your professional trader daily. When you catch yourself doing something your high-performance trader would never do, don’t beat yourself up, just correct course and keep going. After some time you’ll move closer to the professional trader you aspire to become. As the months and years pass, you’ll look back, but wont recognize the trader you once were.
4. Start Reading
Reading turns you into a better thinker and unlocks your creative juices from within. You will find yourself coming up with new and better trade ideas at unexpected times as your subconscious mind synthesizes information or ideas you’ve been thinking about. If you simply can’t manage an hour, start with 30 minutes. Do it everyday.
5. Get more sleep
Being a consistently effective and profitable trader takes a great deal of focus and attention. If you’re operating on a lack of sleep, your body simply wont be able to operate at peak performance. If you’ve been living on 5-6 hours of sleep or less, do yourself a favor and get a couple of extra hours of shut eye. You’ll feel the difference while you’re at the trade station.
6. Exercise 30 minutes a day
During the noon hour, take a walk around the block to get some air and decompress from the morning session. Don’t worry, you wont miss anything. Set some stops or close out your position so you don’t have to worry about anything. You’ll come back refreshed and ready to tackle the afternoon session.
7. Keep Momma happy
As you know, active trading is often a stressful endeavor. Trading can take an emotional and psychological toll on both aspiring traders working toward profitability and seasoned traders going through a deep draw down. If you bring those negative emotions to the dinner table each night and let it affect your life outside of trading, you and your family will be in for a rough time. One way to keep Momma happy is to include her as part of your team. Communication is the first step to understanding. If your significant other knows the challenges you’re facing and how hard you’re working to right the ship, your chances of getting support and maintaining harmony greatly increase. The second thing you can do is work hard to contribute on the everyday things that lubricate a well-run household. How hard would it be to do some laundry, pick up the house, or have dinner well on it’s way when the Boss comes home? Your partner is making sacrifices for you to be able to trade. You need to make sacrifices too. You’ll be amazed how well this works.
8. Cultivate Spirituality
I’m not talking about religiosity. I’m talking about spirituality. There is a difference. At a fundamental level all the great religious traditions teach us to calm our egos and the animal spirits that rage within us all. That harmonizes well with the traits all phenomenal traders possess. That is, the ability to quickly recognize when they are wrong, accept that they’re wrong, then doing something about it. When traders ignore stops, its their egos that wont let them close out and take the loss. When you’re not attached to your ego and no longer have the urge to prove you’re right, hitting the button to close out a loser takes no effort at all. It’s automatic. When you cultivate your spirituality and integrate the universal virtues of humility, patience, and inner fortitude into your everyday life you’ll bring those virtues with you to the trading room, and that can only be a good thing.
9. Expand your playbook
Markets are dynamic, they are changing all the time. What is working for you now may not work in the future. Use 2020 as a learning year to explore new strategies with the goal of adding 2 or 3 to your playbook. Here are a few strategies you can explore.
- Explore Options: I am an options trader and can’t imagine going back to trading common stock. Start slow and take your time.
- Become comfortable with shorting: This market won’t go up forever. Pick a stock or two in a downtrend and try buying some puts.
- Non-directional strategies: Perfect for building an income stream
- Volatility Strategies: The historic low-vol environment will end at some point. Be ready to take advantage of a hi-vol regime.
- Explore Futures: Did you know there are now micro mini futures contracts that only require a tenth of the capital required to trade the big boy futures contract? How nice would it be to sleep soundly knowing that if your stop is hit, you’ll get filled.
If you can add a couple strategies a year, you’ll become a more complete trader that can handle markets as they evolve.
10. Increase accountability
I know, I know, you’re accountable to yourself. Sorry, that doesn’t work. If it did, the risk managers and trading floor managers at the big firms would be out of jobs. Brutal accountability will make you a better trader. You’ll cut down on impulsive trades and keep your risk profile within reason if you know someone is looking over your shoulder. It can be a trading buddy, significant other, or a trading mentor. The key is working with someone whom you trust and has your best interests at heart. Boosting your trading accountability will improve your PnL.
11. Start a Trading Journal
Over time, a trading journal will reveal trends in your thinking along with strengths and weaknesses in your trading. For instance, you may find you are an excellent trader before noon, but lose focus and concentration in the afternoon session. Your journal does not need to be fancy or contrived. Simply jot down, in real time, your market observations and how you’re feeling. Let your journal develop organically. Over time it will become an important part of your trading.
12. Stop adding to losers
The best trades work right out of the gate. If price, almost immediately, communicates to you that you’re wrong, why would you add to that position? In my experience, most traders who add to losers are trying to prove to themselves or others that they are right. Market Wizard Jesse Livermore says “I always buy on a rising scale”. Paul Tudor Jones says “Losers average losers”. Add to positions when prices are moving in the right direction. If you begin adding to positions on a rising scale instead of a declining one, your PnL will improve almost immediately.
13. Stop asking why
Human curiosity often undermines trading performance. Regularly we see the price of “good ” companies go down while the price of “bad” companies go up. As soon as we start asking “why” or somehow believe the price action is “wrong” we close ourselves off to “what is” and begin to ponder “what should be”. When the price of a stock is going up or down, trust your charts, trust the price action, develop a trading strategy to take advantage of it. To those who keep insisting on asking why, I will again point you to what Jesse Livermore says on the topic which is “What the dickens does it matter?
14. Upgrade your social media “Friends”
Social media can either be a force for growth in your trading life or hold you back. Just like in the “real world”, we become the company we keep. If you find yourself participating in endless bull / bear debates or let social media trolls get under your skin, you’re undermining your own performance. There are some truly great resources on social media that can help you move the ball forward. Seek them out. Let the mindless debates and the bad apples go. If you do, you’ll feel your stress level and anxiety diminish. Be determined to associate yourself with people who inspire you and increase your understanding of markets, then let that filter through to your trading.
Pulling it all together
Improvement in any endeavor, including trading, can only come when we resolve ourselves to doing something different every day, then follow through on that resolve with action. It’s a tall task. We each have a certain momentum in both our trading and personal lives. That momentum in our routines is hard to break. Market Wizard Ed Seykota states “Everyone gets what they want out of the markets”. I believe that to be true. Some want an engaging hobby, some want to belong to a social media circle, while others aspire to greatness and simply won’t be denied of achieving it. Decide what you truly want and formulate a game plan to achieve it. Use 2020 as a year to begin making incremental, steady progress toward that goal. The list above is a mix of both specific actions you can start doing tomorrow, combined with sweeping changes that will take time to integrate into your daily program. Don’t get overwhelmed. Make small incremental changes that you can measure and keep track of. As the year progresses, you’ll feel yourself advancing. That advancement will lead to more self-confidence, more inner fortitude, and more resolve to keep pushing. Taken together you’ll see the improvement filter through to your trading. If you get stuck, consider me as a resource. I will be more than happy to do my best to help you move the ball. Don’t be afraid to reach out.
If this post resonates with you, please share it with a trading buddy. Maybe they too can benefit from it.
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