James Stanley's New Year Resolutions

Resolutions are important for traders. None of us were born great speculators, so the process of becoming a great trader is often a series of resolutions until we can get what we want out of markets. Below are the three resolutions that I’m taking away from 2013, and looking to improve upon in 2014.

• Don’t manage every position aggressively

A prior resolution that I had made from a few years ago was to avoid leaving large unrealized profits in positions without managing the trade.
This came into my approach from the SNB floor set on the Swiss Franc in 2011. I had built up a beautiful position; I knew I was on the right side of the trade (short EUR/CHF, and short USD/CHF), and I was certain that the fundamentals, the techs, everything lined up in my direction.

As CHF kept getting stronger, I kept adding to my position. And then, Phillip Hildebrand announced that the CHF was going to be pegged to the value of 1.20 against the Euro, and Francs instantly weakened - blowing up a large portion of the profits I had accumulated in the position. Since then, I’ve worked positions by taking profits as they move in my direction, and adding to the position on retracements as long as the trend is still there. And that’s worked beautifully for the most part. But this year, it caused me some complications…

We opened the year with a phenomenal trade in Japanese Yen. Much of this position reminded me of the 2011 Franc move… the fundamentals, the techs – they all lined up for Yen weakness. So, I built up positions in USDJPY, EURJPY, and GBPJPY – and went looking for the BIG move. I started the positions in Q4 2012, and as these trends continued to advance I added to my positions.

Then on February 25th, it looked like Silvio Berlusconi was going to be elected as Prime Minister of Italy, and the entire world got scared. Huge moves against my position showed me that the risk-off markets that were so prevalent over the last few years might come right back. I closed my positions to protect my profits, just as I hadn’t in 2011 when the SNB pegged the floor to the Franc.

And the day after, all of those trends came back. So, I resolved to manage positions more aggressively after 2011… and it seems that I’ve moved too far to the other end of the spectrum (managing too aggressively). This year – my resolution is to find the happy medium of trade and position management.

• Avoid the Noise

This was a noisy year for markets: Government shutdowns, Central Bank liquidity programs, not to mention the multitude of political quandaries around the world.
I trade with a lot of technical, so inherently I try to discount these noisy, often un-tradable events; but this year these issues were so pervasive that it was difficult to ignore them.

This may not have a directly negative impact on my p/l line – but it definitely affects my trading mentality, which will – eventually – hit my p/l line if left unchecked. In 2014, I want to avoid the noise even more than I have before, because the macroeconomic environment looks as if it’s about to get even more interesting, and I want to focus on what matters most: Price.

• Be more balanced

One of the greatest things about the FX market is that its 24 hours a day… And one of the worst things about the FX market is that its 24 hours a day. As someone that has essentially grown up with markets, starting to trade equities and options at 18 and only getting in deeper from there; finding 24 hour a day price action was like a dream come true.

When I was 27 or 28 years old, it was easy to spend 16 hours a day with markets.
But a lot has changed for me over the last 5 years. I’ve moved to New York City, gotten engaged to the woman of my dreams, and I’ve acquired a great number of responsibilities—
at least more than I had when I was spending 16 hours a day trading.

What all of this has taught me is the more balance I have in my life, the more effective I am as a trader. I have perspective where previously I often suffered from myopia.
My fiancé and I have a date set to get married in the summer of 2014, so my most important goal for this year is to be a more balanced, well-rounded man. Trading is an amazing part of my life. Even when it’s bad (when I have a losing day or week); it’s good.

But by doing nothing but trading, I see diminishing marginal returns; and at some points I even see denigration in returns. So, my big goal for this year is to be a more balanced man, which should equate to a more effective trader.  




James Stanley is an Active Trader, and Trading Instructor at DailyFX. James began trading equities and options in 1999 during one of the greatest bull markets of all-time. As the tech boom became the tech bust, James hybridized his short-term trading approach to include Swing-Trading, and Algorithmic system design. James has further developed and refined his approach while working for some of the largest banks and brokerage houses in the United States. James is graduate of Hankamer School of Business at Baylor University