I would dub 2020 as the "Year of the Undisciplined Trader."
I happened to have one of my best trading years ever, but I'm not thrilled about it. The reason: I was continually rewarded for being aggressive, chasing, and even a bit sloppy. Too many times I found myself looking at my portfolio and feeling a bit overwhelmed at the number of holdings or the fact I didn't have any clue why they were moving like they were moving. Multiple times I cut positions simply because I felt like I had too many.
If we're being brutally honest, it cost me money, but it was still the right move. The markets won't always be this "easy." I hate the term easy. The more accurate term is bullish and forgiving. Uber bullish, really. This year is going to leave a lot of successful traders coming away feeling like a genius. Whether that lasts is the question for 2021. Here's a hint: it won't.
The market will always go through these easy periods. They will last longer than you think but never as long as you want.
My issue with 2020 isn't my returns, it's my trading habits. I've developed some poor habits. I know it. I see it on down days. My drawdowns are larger than they should be, or rather, my risk management isn't as tight as I'd like. I've watched myself get caught up in the fear of missing out (FOMO). I don't see it as it is happening, but I do see it when I review my trade logs.
You review your trade logs, right?
2020 has created a lack of discipline.
Maybe it's just me.
It's probably not.
Maybe this insane bullish market will last.
It probably won't.
But even if it does last, I need to get back to proper discipline. My focus for 2021 will be maintaining control of my emotions and fighting off the chase in the worthless single-digit midgets that are skyrocketing triple-digit percentage points on absolutely nothing.
I know I won't be able to call a top. I don't intend to try, but I want to be able to react quickly when I see a change of character develop in the markets. We'll probably see it in price before emotions but the two are intertwined, so there won't be much lag.
One plan I have in mind is to start 2021 with a clean slate. Nothing but cash. And a smallish account. The holdings I have for swings, I'll either rebuy in a retirement account or move to a separate account, but I feel 2020 is such an anomaly that starting 2021 from ground zero will be the best way to measure how deep any bad habits I've developed sit. Once I feel confident my risk management resides in a place where I have complete comfort, or as much comfort as the market will allow, then I'll up the size.
That's my resolution for 2021. Kick the bad habits brought on by the incredible bull market of 2020.
What are your plans to make yourself a better trader in 2021? Feel free to email me or hit me up on Twitter @retrowallst and I can compile them as a list to share with other readers.