5 Reasons Why You Need To Stick To Your Trading Plan
Only when success in the market is followed by a carefully thought-out strategy is it repeatable and long-lasting and a trading plan describes this procedure. How essential a trading strategy is to achieving consistent long-term market success is seen below.
Why You Need To Stick To Your Trading Plan
#1. A trading plan shows you how to reach your trading objectives
The majority of novice traders are unaware that trading is a legitimate industry. In actuality, a business is whatever one does regularly with the intention of producing money.
Everyone who trades will seek steady profits. We all desire a steady source of income, wealth creation, and independence from the Man. However, how can you expect things from a trading company that was never given any thought? You’re just firing in the dark and hoping your target will appear on its own.
Due to this, if the people pitching the ideas lack a proper business plan, venture funders will not pay attention to even the best business ideas. Because how in the world can you expect to run a business in the real world if you can’t articulate on paper what the firm is about, why your strategy makes sense, and how you’re going to put the enterprise on a profitable footing?
#2. A trading plan breaks your goals down into a process
What is the most you will risk on a trade? When do you give yourself permission to slightly increase it? What type of market and pricing structure do you prefer? What sort of rewards are you looking for? How frequently will you exchange? When? Your trading plan provides the answers to these and other questions. Therefore, there is no room for uncertainty; in fact, you should always refer to your trading strategy. It should outline the precise actions you should follow to get where you’re going, whether you’re a seasoned trader or just getting started.
#3. A trading plan structures your trading operations
Your activities will probably be erratic and haphazard if you don’t have a plan or if you do but can’t follow it. Additionally, randomness in behavior and action leads to random outcomes.
For instance, you might start seeking for that one trade that will make up for all of your losses after suffering a loss (or a string of losses). Due to FOMO, you’ll start trading too early or too late as a result of reluctance. Essentially, you’ll be motivated by your feelings. This is the quintessential example of a gambler without a trading strategy to direct their actions.
On the other hand, traders who stick to a plan realize that market success doesn’t happen immediately. They know that market success will come to them if they adhere to the trading guidelines mentioned in their plan since they have tested their trading approach and developed their trading plan accordingly.
A trading strategy enables one to approach the market in a more organized manner. In reality, it is your strongest line of defense against market unpredictability because it is developed outside of market hours with a clear, logical mind. Additionally, it will safeguard you from your emotional, illogical self.
#4. A trading plan promotes confidence
As was previously stated, your trading plan aids in your understanding of the particular market setups, risk/reward ratios, etc. that you are seeking. Your confidence is forged by knowing the ins and outs of your trading strategy. Additionally, your confidence in your approach makes it less likely that fear and shortsightedness will have a significant impact on your trading selections. Instead than acting on your emotions, you frequently make more thoughtful selections.
#5. A trading plan gets you success
Nothing in life is a guarantee, so this is not one either. However, a tested trading strategy will mathematically increase the likelihood of success. Your level of consistency will rise, and so will your chances of success, if you have a tested trading strategy, realize that market success doesn’t happen over night, and can maintain your composure.
Conclusion
This brief post will be concluded by emphasizing that your trading plan is not a magic wand that will fulfill all of your trading objectives. Such a thing does not exist. Instead, consider it a tool that will help you get closer to your objective by outlining a clear course for you and protecting you from your own inconsistent actions.
A common theme among effective traders: they approach trading like a company. Successful traders also maintain a journal diary and/or log, which aims in making choices that improve their overall performance.
