As we reach the end of the year, it’s impossible to ignore what a terrible run the stock market has had over the past twelve months…
Let’s look at the big picture…
The S&P 500 ETF Trust (NYSEARCA: SPY) averages about 8% gains per year. But this year, it’s down a whopping 19%!
This bear market has brought with it some incredibly choppy price action, tough for even the most experienced traders to navigate.
I know that newbies have struggled to find a rhythm in 2022. I’ve spoken to a lot of them personally.
And I get this on a personal level. For traders that thrive on momentum (like myself), it’s been more difficult to find A+ setups in 2022 than at any other time in the past decade.
So, if you haven’t had a profitable year … don’t get discouraged.
It doesn’t mean you’re a bad trader, you’re just stuck in the toughest market in recent memory.
With that in mind, today I’d like to offer some hope for the future — a few ideas for how you can bounce back from lackluster periods in the markets.
(Even if you’ve had a profitable year, these tips could potentially help you maximize your potential in 2023!)
Control Your Confidence
If you want to find any consistency with your trading, you have to have the right mindset.
And the most important part of a strong mindset is confidence.
Confidence helps you stay focused on what matters. It also helps you make appropriate decisions in the moment.
Confidence gives you a firm footing in your trade ideas and enables you to act swiftly when a setup presents itself.
(WARNING: If you don’t have the confidence to pull the trigger when a perfect setup appears before your eyes, you have zero chance of success in the markets!)
It also helps you get back on the horse after a brutal loss (or a slogging bear market).
All that’s great … but confidence can be fragile.
A few bad trades or missed opportunities can eat away at it.
So what do you do when that happens? Think about why you love to trade…
Remember Why You Love to Trade
If I’m ever doubting my performance, I simply remind myself why I love to trade.
The stock market is like the world’s greatest poker game or chess match and I’m proud to have a seat at the table.
There aren’t many careers as intellectually stimulating as trading.
Even during my worst performance periods, I can’t say that I’ve ever been bored as a trader.
Now, compare that to my previous job — working 9-5 as a general accountant — and you’d see a very stark contrast.
Sure, I had a guaranteed paycheck and didn’t have to worry about losing my hard-earned money … but I was miserable.
As a trader, I take on financial risk, but I have a level of personal freedom that most people can only dream of.
That said, trading isn’t for everyone. It takes a special type of person to succeed in the markets.
But if you’re reading this, you absolutely have the potential to be one of those special people.
The key is how you handle the difficult times…
Go Back to the Basics
What do you do when the market has you confused and you’re not seeing the results you’d like?
Go back to the basics.
There’s a reason you made it this far. But you need to focus on your game plan.
Go through your trading journal and find out what’s worked in the past for you.
Once you determine your bread-and-butter setup, stick with it!
For me, that means focusing on short setups and put plays. But your strategy may be very different from mine.
Here’s the truth…
When you lose confidence, it’s not the time to get fancy and experiment.
You want to go back to rebuilding on a tried-and-true foundation.
To do that, cut out all the excess and go bare bones, back to what you know.
You’ll occasionally be tempted to veer away from your bread-and-butter strategy … but keeping your process simple can help prevent you from going astray.
Stop Setting Financial Goals
Working toward financial goals will inevitably leave you disappointed.
If you’re truly dedicated to becoming the best trader you can be, you won’t be satisfied just because you have a certain amount of money in your account.
And if you aren’t profitable yet … it makes even less sense to set goals toward a specific dollar amount.
If you’re in the markets only for the money, you’re setting yourself up for failure.
You’ve gotta really love to trade … that’s the only way you’ll make it through the inevitable ups and downs of the stock market.
First, your only goal should be this — lock in a solid green year as a trader.
After that, your goal should be to beat the market (i.e. deliver better returns than the major indexes).
Until you can achieve this, you might as well have your money in the SPY.
‘Making it’ as a trader isn’t about money. It’s about knowledge, first and foremost. Then, it’s about consistency.
I know people who are miserable with millions of dollars.
On the other hand, I know traders who are happy as clams making a modest, low six-figure income with complete personal freedom.
After all, there’s a reason that 91-year-old Warren Buffett is still working hard at trading every single day — even with $100 billion+ in the bank!
It doesn’t matter how long you’ve been in the markets … There’s always more to learn.
My advice? Don’t set financial goals.
Instead, strive toward basic profitability and overall consistency.
There’s no sugarcoating it … this has been a tough year for the markets and traders alike.
But remember this … how you handle the tough times has a huge effect on your overall success as a trader.
These are the moments that make or break a trading career.
So, how are you gonna go into 2023? Confident, prepared, and ready for anything!