Quick Lessons from 2014: Some End-of-Year Trading Thoughts
As we’re very close to the end of another year, I think this is a good moment to look back and see what lessons can be drawn from the previous 12 months of trading. Bear in mind that it’s beyond the scope of this article to be anything more than a general overview.
With that in mind, let us begin :
Highs & Lows
The old trading adage ‘what looks high can go higher and what seems low can go lower’ has been confirmed this year. Just take a look at the S&P500 which had its first-ever year without a single four-day losing streak and now sits at all-time highs.
The lesson? Use stops or stop trading.
This was the year with an all-time low volatility in EUR/USD (see in the chart), with other major currency pairs at multi-year volatility lows as well. This has particularly affected day or short-term traders.
The lesson? I’ll just quote Jesse Livermore on this: ‘The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.’
See more here