Sticking to the Plan
We may have mentioned it a few times already, but it bears repeating: A forex trading plan is only effective if it’s followed. Yet, while this sounds like a simple enough instruction, most traders don’t manage to do this. Today, we’re going to look into the reasons why traders so often fail to stick to their plans, and offer up some practical guidance as to how you can avoid the same fate.
Reason No. 1: Trader incompatibility. The idea behind a trading plan is that it should be personalized to fit your goals, risk tolerances, and lifestyle. You can’t just take a trading plan off the shelf – in order for it to be compatible with the person that is expected to execute the plan, the trader has to develop each aspect of it themselves, taking into consideration their goals, their needs, and their personality. It has to be based on reality, not hope, and this means that a process of earnest self-analysis is required before creating a plan. If you build your trading plan around someone else’s, or base yours on false assumptions, you will be incompatible with it – and you won’t be able to follow it.
Reason No. 2: Impatience. A trading plan should be designed to bring returns over the longer term. Yet, many traders don’t give their plan a chance to work, and drop it after a string of losses, rather than sticking it out through the rough times that are inevitable for every trader.
Reason No. 3: Lack of discipline. There is no point in having a plan if you don’t stick to it consistently and apply it in every situation. To do this takes strong discipline, and as most of us are aware, this isn’t the easiest thing to cultivate. Yet, without rock solid discipline, your trading plan will be worthless, and you might even be better off trading without one.
Reason No. 4: Self-destructive behaviour: Many traders have psychological issues that can come to the fore when they are experiencing extremes of good or bad fortune. This can be a tricky thing to overcome, and some traders never do, but those that have the self-awareness to know of these issues and the discipline to overcome them always go on to become much better traders.
So, if you are finding it difficult to stick to your trading plan, then it’s probably due to one of the four reasons above. Remember, self-examination – and making the effort to improve on your weaknesses – are two of the cornerstones of making and sticking to a successful trading plan.