The beginning of a New Year is often a time when we look back on what we’ve achieved in our life, both personally and professionally. It’s a time to re-evaluate our priorities, reflect on what we’ve done well and think of how we could do better. It’s in this spirit that people set New Year’s Resolutions…but why does it seem so difficult to achieve them? How can we set goals and actually stick to them?
The 1st part of this article will cover a few tips to be more effective in following your resolutions and achieving your goals. We will also discuss a few steps to follow in order to make 2017 a more successful year as a trader.
The 2nd part will talk about what to expect from the markets in 2017 – general trends we can expect to observe in different asset classes, the potential risks involved and the opportunities that accompany them.
How to Stick to Your Trading Resolutions
How to keep New Year’s resolutions
Achieving success is not all about luck. It requires more than that!
You need commitment, dedication, hard work and above all, a plan. While thinking about your plan, you need to know yourself and analyse your strengths, weaknesses and competitive advantage. You need to think about you aspirations, your dreams and ambition for all areas of your life, from your personal life and career to your family and love life. It’s important to know where you want to go, so you can define your goals!
This attitude should also be applied in your trading. If you have any experience in trading, you will realize that all those questions are ones you’ve asked yourself while thinking about your trading plan and implementing your trading strategy to validate it (for further information, read Why you should always test your FOREX strategy).
So, let me give some tips to change your News Year’s resolutions into specific and reachable goals you will never fail to achieve. Let’s focus here on consistency instead of perfection!
1# Make your goals as specific and clear as possible and divide them into smaller-goals if needed
While thinking about what you want to achieve, you want to be sure to be as specific as possible. It’s not enough to say “I want to be a better trader this year” or “I want to earn more money every month”. The real question here is: how do I plan to achieve that?
Do you want to spend more time studying how the market works? Do you want to change your strategy? Do you want to better control your emotions, so then your trading is less affected by the ups and downs of your mood? Do you want to invest in other financial products?
For example, you should say to yourself: “Ok, from now on, I will use a demo account to back test my strategy and adjust parameters that needs to be adjusted. I will write a trading journal, so then I can review my previous trades and follow my progression. Finally, I will also learn more about what factors affect the FOREX market to improve my knowledge”.
2# Be patient
It seems obvious, but you need patience to achieve your goals, as some of them require effort and long-term dedication. But don’t worry, patience is a skill that can be developed, just like any other skill.
Self-discipline and willpower are two concepts related to patience. If you work on your self-discipline and willpower, you also work on your patience. You also need to be persistent to be able to improve your patience. You should be patient, as achieving your goals will require sacrifice and compromise. You must be patient and not give up when you face obstacles!
Discipline and patience are 2 core skills a trader must have to make profits in a consistent manner over the long-term. You need to be disciplined to follow your trading plan. You need to be patient to wait for the perfect chart configuration before entering the market. You need to be patient and wait for your position to reach its limit, instead of securing your profits and closing it as soon as a few PIPs of profit appear.
3# Find the time and schedule your goals
We all choose to spend the time the way we do. It’s important to make your goals a priority, which means including them in your schedule or calendar. Time management is essential for better personal and professional effectiveness. In that way, you will achieve your goals with less pressure and less stress.
As we said above, each goal should be sub-divided into several smaller goals. To each of these must be associated a deadline and specific steps to follow. It’s also important to identify your own barriers in being more effective in the use of your time. For example, if you say “yes” too often, you might need to learn to say “no” to things that aren’t an effective use of your time.
4# Measure your progress
When thinking about your goals, the best way to do it is to use the S.M.A.R.T. approach – that is, Specific, Measurable, Attainable, Relevant and Timely goals. It will help you to have a better structure and to monitor your goal’s progression, as you can create efficient and verifiable trajectories towards your objectives. You can then adjust the effort accordingly, depending on how close you are from reaching your goals.
Your trading journal is a very powerful tool to be able to measure your progress, as you can analyse evolving several statistics on your money management and trading performance. In short, a trading journal gives you an idea of what you have already achieved and what you still need to do.
The 3 things to do to get the biggest positive impact on your trading in 2017
1# Be more process-oriented than result-oriented
If results are more important to you, you might want to start thinking differently, as focusing only on the outcome will put more stress and more pressure on you. You will miss important trading opportunities, as you will tend to engage in more impulsive trading.
If you are more process-oriented, you will have a long-term mindset that will be more useful in the long term. You need to focus on making the best trades, without being too focused on the outcome. You want to focus more on the process than the result. You want to ask yourself, “did I follow my rules, was I disciplined enough, did I apply appropriate money management”, rather than, “was the trade successful”?
2# Fully understand and work on your method
As we’ve already said numerous times: you need to have a sound and reliable trading plan before investing your money on the markets. You need to determine your method depending on your trader profile and your availability, so the 1st thing you need to think about is…YOURSELF! You need to ask yourself the right questions to determine which trading method and strategy you will apply.
Once you’ve determined a method that suits you best, you need to backtest it and fully understand it, as well as all the parameters attached. Once again, your trading journal will be very useful to help you to objectively assess the results of your method.
3# Understand the importance of consistency
If you want to be able to make consistent profits, you need to be more consistent in your trading approach. You cannot constantly change your trading method, the frequency of your charts, or the indicators you are using. You need to stick to a proven strategy with a trading plan that covers everything, from the asset you’re trading to the risk management you’re applying.
Some of our previous articles will give you an additional insight on different concepts we’ve mentioned so far:
What to expect from 2017
2017 won’t be easy, as there are a variety of important factors that could increase volatility and uncertainty on the markets. Portfolio re-allocation and money flow that follows rising risks will create numerous moneymaking opportunities.
Let have a look of the main risks in 2017.
Political risks in Europe
Rising nationalism and populism in Europe has already changed the outlook of the political landscape in 2017. The outcomes of numerous key elections in Europe are highly uncertain, such as the elections in France, Germany, the Netherlands and Italy – not to mention Brexit’s negotiations and Greece’s finances.
Worldwide relationships with America will be challenged in 2017 under Trump’s administration, as he is threatening global stability. A possible trade war will highly disturb worldwide trades, tariffs and agreements. Read our article on How to use the trump effect to increase your FOREX performance.
2017 will be an important year for China, which will hold its 19th National Party Congress. Trump’s desire for a trade war is clearly threatening the overall stability of US-China relations.
Weaker worldwide economic growth
With all the worldwide elections, economic reforms will be on hold, especially in France, Germany and China, while other countries have already done as much as they can in that regard. The strength of the American Dollar is a real challenge for developing countries indebted in USD. Weak oil prices also have negative consequences for countries highly dependent on oil production and exportation.
Higher divergences between worldwide monetary policies
European and American monetary policies seem to be more and more divergent. While the FED started to increase interest rates, the ECB’s main rates are still at their lowest levels. The FED is tightening its monetary policy, while the ECB has recently expanded the deadline of its quantitative easing program.
Politics might also start to have a bigger impact on central banks, especially with Trump. He will almost certainly replace Janet Yellen as the head of the FED in February 2018 with one of his allies. Rising criticism from Theresa May towards the BoE and from Wolfgang Schäuble towards the ECB are also undermining central banks’ credibility.
Those risks will likely weigh on markets and increase volatility, but they will also create opportunities. Remember how important inter-market analysis is. If you are aware of the relations between different asset classes, you will have a competitive advantage against other traders. As an example, read our article: Understanding the correlation between usd and commodities.
Gold is a safe-haven asset. Traders invest in gold in times of high uncertainty and volatility. With all the risks we mentioned above, investing in gold could be a good opportunity this year.
The dynamics on the oil market will continue to remain highly uncertain this year, and prices will still be very volatile. Most projections are showing signs that oil prices are on the recovery path, but they are still far from their potential highs. In 2016, the most important factors that influenced oil prices were the excess supply situation, the evolution of the American Dollar, the increase in American oil stock and agreements about production cuts from OPEC members. These challenges will remain the same in 2017: uncertain global economy outlook, controlling high speculation on oil prices, managing the excessive supply situation, worldwide geopolitical and economical dynamics.
The current valuation of American stocks is over-valued, as numerous valuation indicators show, such as the price/book ratio, the price/sale ratio, the dividend yield and the P/E ratio. What can we expect with American indexes at an all-time high? Those indicators don’t have an impact on the short-term evolution of the markets, but it does indicate that this situation cannot last forever, and that a sell-off period (or a correction phase) will appear with any bad or negative news that will occur.
European indexes could be volatile this year, and this can create investment opportunities. Some economists forecast earnings in Europe to improve, which could push indexes higher. As it stands, European indexes are currently lagging – therefore, valuations are attractive, but they will face numerous political risks with a lot of elections.
There are many factors that influence the value of the currency of a given country, and its evolution can have important consequences. For example, changes in exchange rates affect a country’s trade and its economic health: a “strong currency” will penalize country’s exports compared to a “weak currency”.
Here are some important factors influencing currencies:
- The economic health of a country
- The political stability of a country
- Terms of trade
- The level of debt
- The deficits
- Balance of payments
- Foreign exchange reserves
- Investor sentiment
- The health of the labor market
- Central banks decisions
This last point is certainly the most important of all, since it is generally investor expectations regarding central banks decisions that trigger movement in the currency market. Indeed, the central bank of a country is the monetary institution that decides the level key interest rates and the amount of money in circulation to achieve its objectives. Higher interest rates make the currency of a country more attractive and more in-demand by investors, which increases its price. For further information, read Importance of central banks on the FOREX market.
For major ideas on the FOREX market, please check our article on How to use the trump effect to increase your FOREX performance.