You start trading or do not get it, and the market is often wrong…
Do you think that a successful Trader arrives in front of his screen and clicks on Buy / Sell on a whim, or even after looking at his graphics for a few minutes?
FALSE!
Preparing a trading plan is one of the keys to a successful trader and this is just the first step to be successful.
You cannot expect to write a trading plan and magically make money for you. There are some additional actions you need to make to run a trading plan.
So, here are the five reasons why in most cases, trading plans fail and how you can make them much more effective.
Test your method
It’s pretty common…
You follow an online training on Trading
Awesome!
The strategy makes sense, so you note the rules and immediately start applying them in your live trading account.
Not so good that it finally…
After applying it for one month, you lose 10% of your account and abandon the trading strategy
You could have avoided this by testing your demo plan before going into real life.
Testing your trading plan helps you to:
- It shows you whether your strategy is achievable or not.
- This gives you confidence to execute your plan.
- It shows you what results you can expect.
- Writing a trading plan is essential. But once you have a plan, make sure to test it before risking real money.
- Adapt Your Trading to your Personality and Lifestyle
Let’s say your t-shirt size is extra-large. Would you wear a shirt that is an extra small size?
Of course not.
What you do in the privacy of your own home is personal.
My point of view is that a trading plan that does not suit you will not work, just like this t-shirt.
Still, many traders insist on trading by a strategy that does not match their personality and / or lifestyle. There are basically three elements to your trader personality:
- The time unit of your Trade
- The asset you are going to trade
- Risk tolerance
- Do not Ignore ANY Parameters in Your Trading Plan
Are there any mistakes in your trading plan? If there are situations for which you are unprepared, then you risk losing when you face these situations.
You can handle these situations correctly … or you can not.
But why leave that to chance?
Here are the questions I ask myself before starting a trading day:
How many losses in a row should you allow before taking a break and stopping trading today?
Is there a situation where I might need to break some rules?
It is not always possible to prepare each scenario well. But try to practice as often as possible and keep an eye on the changes made and add them to your plan.
Grow your Trading as a good wine
Trading plans are meant to be a set of rules that you strictly follow to earn money over time.
At first glance, they seem to be written on paintings and exhibited at the Louvre. In other words, once written, they should not be changed.
But, you need to provide some degree of flexibility in your plan.
Some trading plans work well on the first try.
Others need time to evolve.
Like a good wine, your trading plan can be very good at first, but can only reach its true potential with age.
There are several reasons why a trading plan must evolve
It can become more optimized, like improving the input
It may need to change with your life events (children, retirement, new job, etc.)
You want to simplify the process
Market conditions change, so you need to change your strategy
Just make sure the changes really improve your results before adding them to your plan.
- Be careful not to take bad habits
- Studies show that up to 45% of our daily behaviors are controlled by habits
- Think about it for a minute …
Almost half of the things you do during the day are the result of preprogrammed routines that have been established in the past … and not always by you. Some of these habits were consciously created, but most of them were not.
Habits can outwit your plan in two ways:
Existing bad habits can prevent you from doing what needs to be done
Not forming good habits will not allow you to maximize your trading plan
Having a written trading plan is essential to the success of your trades, especially if you are inclined to act impulsively. But a trading plan alone will not make you can always profitable trader.
There is much more work you need to do to take advantage of this plan in a consistent way. If you are having trouble making gains even with a good trading plan, your trading plan may not be the culprit.
Goddess Inside 