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Goodbye 2023, and hello 2024.
The year 2023 is coming to an end, and the time has come for a fresh start in 2024. The end of the year is a great time for traders to review their 2023 trading performance and reflect on how they’ve fared in the market.
To take advantage of the ‘clean slate’ that comes with the new year, here are 6 new year resolutions traders can consider in 2024.
Key Points
- Traders should create and adhere to a well-researched trading plan that outlines their strategies and includes clear entry, exit, and stop-loss levels to remain disciplined and objective.
- Diversifying the trading portfolio across different asset classes and employing risk management strategies such as using appropriate leverage and setting daily loss limits can minimize potential losses and exposure.
- To stay competitive, traders should continuously improve their technical analysis skills through education and community engagement, and keep abreast of market news to understand and anticipate market movements and volatility.
1. Enforce a trading plan
Traders may draft a trading plan according to their needs and characteristics. A trading plan is an outline that is properly researched and documented by traders to help guide them in their trading decisions. Such trading plan should outline how traders identify an asset they want to trade, the purpose of the trade, and even the entry and exit point.
Each trading plan is unique and is built in a way that suits the trader’s trading objective. As the trading plan is built on the trader’s trading goals, traders must be disciplined and stick to the trading plan. A trading plan helps to ensure that the trader knows his steps to take, stays objective with his decisions, and would be less affected by psychological changes or market movements.
The trading plan can include setting a suitable entry price, exit price and stop loss for each trade, even before executing the first move. This helps traders to avoid getting swept up by their emotions when the active trade faces price movement, as they already have a target price in mind for all scenarios. Sticking to the trading plan will also help eliminate traders from second-guessing their trading decisions.
2. Set a stop-loss for each trade
Even the most well-planned trade can result in losses. Hence, knowing when to cut those losses is a critical part of becoming a successful trader.
Traders can often hold on to losing positions in hope that the price will bounce back, but sometimes, these losses could grow bigger, especially if the asset continues to fall. For example, when a trader buys a stock at $100 and sells it off at $90, this represents a 10% loss. The trader would need to trade a stock for an 11.1% gain with the remaining $90 to get back his breakeven capital of $100. However, if he held on to his position and sold the stock at $80 instead, this represents a 20% loss, requiring a 25% gain using the remaining $80 in order to break even.
This shows the increased difficulty to break even from a greater loss. Consider using the stop-loss function when trading to avoid this scenario and set a price target you are willing to take the loss at. This can be a percentage decrease, or a specific price that you determine.
3. Diversify Your Trading Portfolio
Try diversifying your trading portfolio. Having more positions in the market, across different asset classes, can help to potentially reduce the risk your trading portfolio faces. To diversify your trading portfolio, you may trade several different markets, and also utilise different investment products.
Traders can diversify their portfolio among products like CFDs on stocks, bonds, commodities, funds, real estate and cash; or you can even diversify your portfolio within an asset class, such as selecting different types of stocks including large-cap stocks, growth stocks, blue chip stocks and defensive stocks. How a trader diversifies their portfolio is entirely up to their risk appetite and trading goals.
Explore the insights to diversification with our article ‘A Guide to Portfolio Diversification – Don’t Put All Your Eggs in One Basket’.
4. Employ Risk Management Strategies
As a trader, improving risk management strategies can be beneficial as it helps traders minimise their exposure when trading. There are various ways a trader can manage their risk, such as not overleveraging their trades. While leverage has the potential to help traders increase earnings, it can also increase potential losses. Using higher leverage on your capital means taking on higher risk, and hence, traders should look to leverage only what they can stomach.
Traders can also use trading tools such as stop-loss or setting a daily loss limit (DLL) to help in their risk management strategies. These tools are great in helping traders to minimise their loss when trading. It’s important for traders to determine their DLL as every trader have a different risk appetite.
5. Improve on Technical Analysis Skills
Make a plan to learn new technical analysis skills, trading strategies and indicators. Traders should constantly strive to improve themselves as the market conditions are ever-changing. Traders can join a trading community where traders share their indicators, moves, and skills. These discussions on how each trader executes their trades or what signals they are looking for will further improve your trading knowledge.
Traders can also enrol in educational courses to improve their technical analysis skills. There are many things that traders can still learn from and improve on, even if they have been trading for a long time. These courses will help you better analyse the charts, use the right indicators, and potentially improve your trading success rate. A better understanding of technical indicators will also help traders plan their trades more confidently.
Here are some of the key technical skills that a trader could learn more about:
6. Make it a point to keep up with the news
As a trader, keeping up with the latest market news can help traders to manage their trades better. It is important to understand how market news will shift the market, and whether market volatility will come along with that news.
For example, in 2023, the Federal Reserve has raised interest rates multiple times throughout the years, and the stock market always moves accordingly to these announcements. At the Federal Open Market Committee (FOMC) meeting in December 2023, the Federal Reserve announced no further rate hikes for the remainder of the year, a decision that ultimately brought the federal funds target rate to a range of 5.25%-5.50% by the end of 2023.
The rationale is straightforward: heightened interest rates escalate borrowing costs for financial institutions, which, in turn, impose higher loan rates on businesses. Consequently, companies scale back expansion plans due to increased borrowing costs, tempering growth expectations and potentially reducing stock prices.
Discover more about the 5 pivotal market events of 2023 and how they shifted the global market economy.
Traders can use broker apps and platforms to help get all the latest economic headlines and indicators to ensure they keep up with the news. Having an economic calendar readily available can also come in handy. Traders can also tap on social media platforms to stay up to date with the latest happenings. Traders can also follow Vantage on Instagram or TikTok to get all the latest market updates.
Conclusion
Listed above are just some new year resolutions that traders may consider following in order to improve themselves and their trading crafts further. To help with some of the trading resolutions, such as improving traders’ technical analysis skills, traders can open a free demo account with Vantage.
It allows traders to practise their technical analysis and try out different trading strategies and techniques without risking their own capital. In addition, the demo account will allow traders to get a chance to test out trading different CFDs products such as forex, commodities, stocks and ETFs.
