Time To Slack Off
Over the weekend I reviewed my performance so far this year. I know I have reached my own base line trading goal for the year since September. At the end of October, I hit my ambitious goal as well. Whenever that happens, I reduce position size and trading setups that I will use until the end of the year. I will also allocate more time to do my research. It is a good practice and something you should put into your own trading plans too.
When your trading goal for the year (or whatever period you choose) is reached early, it can be the result of more outlier winners (in terms of amount) than usual. It can also be the result of more winners than usual. It can also be both. Experience and my research on trading methods told me that such improvement usually would not last.
By reducing the overall position size I am going to take until the end of the year, I am reducing the impact of losing trades significantly. I am not talking about a cutback of just 10 to 15 percent in size. I am reducing my position size by half. Should these last two months of the year I am doing fine, I have nothing to worry about. On the other hand, if I am facing significant setbacks, I will stand to keep more of my money I made so far.
Those who read my writings know that I am someone who advocate tracking each trading setup one uses separately. This tracking of your own performance based on each separate trading setups can help you identify which one has been doing exceptionally well. In my case, it is the counter-trend setups that have been doing so good I know they are likely going to fail more going forward. So until the end of this year I will be limiting my counter-trend trades significantly.
Some of my trading buddies prefer outright stop trading after their goals for the trading year is reached. Quite a few would take a long vacation or work on a hobby project until after New Year. That is the other way to avoid losing money back to the market.
Spending the hard earned money on yourself and family surely beats giving it back.