2018 and 2019 were no doubt very challenging years, even for the best of us. However, there was a key difference between both years; the 2019 market was challenging on a whole other level. 2017 was a roaring bull market which made a ton of investors a lot of money, and a lot of people resigned to become full time traders. However, in early 2018, little did we know that we were at the tail end of that amazing bull run. Before the bulls went home they made their final run in the form of $NOW, $HVN, and $VITA to name a few. But when the world needed them most, they vanished. (Yes Avatar pun intended).
But there’s a huge disparity between the 2018 and 2019 market environment; in 2018 we were in a bear market, while in 2019 we were in a whipsaw market. After the bull run topped at 9k levels, we immediately experienced a turn in the market. We were in a downtrend, and it was obvious. And that’s the best part, the fact that it was obvious. Knowing that we were in a bearish environment, any trader could’ve simply remained in cash and wait for potential outliers.
The next best part about 2018 is despite being in an overall downtrend, there was a ton of speculation going on. I’m pretty sure most of us remembers the telcoserye and how that went down. There were also other outliers like $ATN, $FB, $PPG $ABA, $VUL, etc. There were obvious times where we needed to remain in cash, and there were obvious times where speculation led to several opportunities. 2019 was a different animal.
Starting off 2019 was actually a good period, bears were still mostly in control but there were still a couple of outliers like $WLCON, $GREEN, $HOUSE, $PHEN, and $HLCM. But the latter parts of the 2nd quarter all the way to the end of the year was totally different. Yes there were still opportunities in names such as $KPPI, $PPG, and $MWC, but for the most part we were in a whipsaw environment.
Unlike in 2018, the 2019 market had no clear direction. If you didn’t have a macro view and relied purely on technicals, the market has basically been sideways. Every time the sentiment shifted negatively, that’s when the index begins to rebound. Then every time the index tries to break key resistance levels, it gets sold off a few days after. It was “A Death By A Thousand Cuts” type of scenario.
Nevertheless, it’s a start of a new year. We’re not in blue skies yet, but that doesn’t mean we can’t find ways to improve our trading. Let’s take this beginning of a new decade as an opportunity to become better and wiser traders. Here are a few tips on how to trade better for this upcoming new decade:
TIPS FOR 2020
1. TAKE RESPONSIBILITY
One of the key things we all need to begin doing this year is to take responsibility for ALL of our outcomes. This includes all the mistakes, difficult periods, and setbacks. There’s always one common phrase we hear whether it’s from our trader friends or on social media, “Hirap ng market eh!” That’s a phrase we need to stop saying in order to truly take responsibility.
Blaming the market for a drawdown is an excuse. We do not control what the market does, so what we should focus on are the factors we have control over. We have control over our entry, stop loss, position size, strategy, work ethic, discipline, and the like. It’s time to begin focusing on those and taking full responsibility for all our results and outcomes.
2. JOURNAL RELIGIOUSLY
In his book, Think and Trade Like a Champion, Mark Minervini mentions how conducting regular post-performance reviews made him a market wizard. It doesn’t take much to journal every trade you make, all it takes is the discipline to turn this into a habit. Even summarizing all your trade logs doesn’t take much time since everything is automated these days.
If you’re an InvestaPrime+ subscriber and have access to the InvestaJournal, all the fancy graphs and advanced analytics are automatically computed and shown after every trade log is entered. The same goes if you have a handy excel sheet. Most of the effort happens when you actually analyze all the numbers and statistics. As Mark Ritchie, famously known Momentum Master, said, “You find some of the best ‘Aha’ moments when you study your previous trades.”
3. RISK MANAGEMENT
You’ve probably heard this over and over: “Cut your losses and let your winners run.” It’s also most likely in almost all trading books just simply rephrased to avoid boredom. Well, it’s said again and again for a reason: IT’S FACTS. There’s a reason why the importance of risk management is in most trading books and interviews with some of the best traders.
Ed Seykota, world-known market wizards, said that three key things you need to do to have a CHANCE of being a successful trader is: 1. Cut your losses 2. Cut your losses 3. Cut your losses. Ask any market wizard or successful trader you know, they will always mention that risk management is key to becoming profitable.
Here’s another thing we hear all the time, “Have a trading plan.” It’s also probably something most of us do religiously already. But there are still some out there who trade on impulsive behavior, which may work in some cases but for the most part, will not benefit you in the long run. Trading out of sheer impulse may get you a winner or two, but do this on a consistent basis and you’ll eventually run into a stock that goes up 15% in three minutes just to go down another -20% the next.
You don’t lose when you lose all your money, you lose when you QUIT. Any trader can make one winning trade that can change their life, but to make money consistently from the markets over a long period of time requires a deep-rooted commitment to becoming the best trader you can be. In the words of Javi Medina during InspirePH, “You have to COMMIT to MASTERY!” Without that undying commitment for the game, small bumps on the road will bring you down instantly.
Also, only those who commit to mastery put in the work required to become great. Always remember, anything great won’t come easy. You have to dedicate a tremendous amount of time to be one of the best at this craft, you have to become a perpetual learner. When the going gets rough, when your back is against the wall, and all odds are against you, the only thing that will keep you up is your undying commitment to become the trader you always BELIEVED you can become.
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