Strategy for Trading An Uncertain 2016

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As the trading year for 2016 begins, investors and traders are hoping for a much better year compared to 2015 which was a year to be forgotten. The STI index registered a loss of 15% for the year as global uncertainty prevailed, such as the oil crisis as well as a slowdown in China’s economy. We ended 2015 with the highly anticipated interest rate hike by the US Federal Reserve. Moving forward to 2016, as we start the year, uncertainty still prevails with regards to the economic front as well as with the oil situation. This may continue to last for several more months before we see more clarity, which may only come in the later parts of the year or even in 2017. Stock prices are currently at multi year lows but many seem to be at the final stages of a downtrend.

So what is the best strategy moving forward for the year? Personally, I believe that having prudence and patience is the most important. There still exists numerous opportunities in the current market, even for a long only strategy but the trick is to avoid large losses while looking for these opportunities. Therefore, having a disciplined approach is key. Never chase trades that have gone way past your entry points and always have an exit point or stop loss threshold so that you minimise your losses when you are wrong. Also, have a trailing stop to ensure that trades in which you are in a winning position never turn to losses. Even in uncertain markets, there is still a way to make decent profits only if you stick to your strategy and never get emotional about any one trade because it only takes a few bad trades to ruin your entire trading year’s performance.

2015 was a challenging year, and 2016 might be just as challenging. However, it is through tough times that you will learn the most, only if you take the problem head on and not avoid looking at prices just because you are in a big loss. Make sure you analyse all trades so that you can learn from past mistakes and take a proactive approach to get better even though you are having a bad year. Wishing you all the best in the year ahead 🙂