Kathleen Brooks' New Year Resolutions

• Stop trying to make the market fit my strategy

After spending years mastering your strategy you know what to look for, you’ve passed exams in technical analysis and you have successfully implemented that strategy in the markets, then all of a sudden something changes and you’re not making money any more. What has happened, have you done something wrong, is the strategy broken? Most likely, the market conditions no longer favour your strategy and it’s time to change tack.
This can be a disconcerting experience, but my number one lesson for 2014 is to remember not to try and make the market fit my strategy, and start to make my strategy fit the prevailing market conditions. For example, trying to implement a break out strategy when the market is in consolidation mode. You see the price break above your noted resistance level; you put on your trade only for price to turn back around causing you to lose money. A breakout strategy does not work in consolidating markets. Instead, you need to think about what the market is doing first, and if it is moving sideways consider something else, for example a range trading strategy. Having a repertoire of ways to trade the market rather than one favourite strategy that you try to use in all conditions is a more sophisticated (and hopefully successful) way to trade. 

• Stay disciplined 

This all comes down to psychology and managing your emotions while trading, and is something every good trader should try to improve each year. We have all been there: you have a losing streak and then you become afraid of the market and try to avoid trading altogether. Or alternatively, you have a few good trades and all of a sudden you think you are George Soros. Both of these reactions are the emotional extremes we should try and avoid. Instead sticking to a trading plan - using a stop loss, keeping an eye on the markets so you know whether to run with your profits or close out and bank what you have made already – is the best way to success, in my view. If you have 1, prepared properly, 2, executed your trade with appropriate risk management techniques and 3, kept abreast of anything in the financial markets that could impact your trade then you should be able to sleep easy at night; and in 2014 I need all the sleep I can get! 

• Join the community 

The rise of social media means that it has never been easier to connect with other traders and FX analysts to share information and ideas. This is extremely useful for traders as becoming part of a “community” can help you to get an idea of what the crowd is thinking. If you are a technical trader this is what you are always aiming for, after all, technical analysis is essentially about determining market consensus and using this information to determine trends in the market.
Becoming more actively involved in trading blogs, communities twitter etc., is my final resolution of 2014. I tend to dip in and out of them rather than engage with any consistency. This means that I am potentially missing out on a wealth of information and trade ideas. Trading can be a solitary business, but the community can make you feel part of something and not so alone when your trade goes wrong or the going gets tough. 



Kathleen Brooks is Research Director at FOREX.com. She has extensive knowledge of the financial markets after working as a trading analyst on the foreign exchange trading floor at BP's London office. While she was there, Kathleen covered foreign exchange, fixed income and equity markets and also co-managed a trading book for its analytics trading desk.  [More about Kathleen Brooks]