That's My Trading Plan and I'm Sticking To It
When your money is on the line, it can be difficult to stay calm and rational. Many traders make trading errors and regret it later. There are many reasons for abandoning a trading plan. Some traders don't outline a detailed trading plan. They trade by the seat of their pants and when panic sets in, they act on impulse. Other traders cannot seem to follow their trading plans no matter what they do. And they can't understand why. Everything just seems to happen so fast; maintaining discipline seems beyond their control. One minute they are in a rational state of mind, and their objectives seem clear, but the next minute it seems as if they are in a state of panic. They don't know what to do. Have you ever felt this way?
As much as it seems like you may not have control over your impulses, you do. It's all a matter of gaining awareness, and taking precautions to stick with your trading plan. If you have trouble sticking with a trading plan, the first step to gaining control is admitting that you have a problem. When you anticipate that you have a problem sticking with your plan, you will see the need to make a concerted effort to develop strategies to stick with your plan. When you are aware of the problem, you can more easily take precautions that will help you maintain discipline.
If you want to seriously stick with your trading plan, outline the reasons why you want to stick with it. Usually, the best reason is to limit losses. If you have trouble sticking with a trading plan, you might write these reasons down on an index card and be ready to pull it out and read over the reasons when you feel the urge to abandon your trading plan. For example, suppose that you buy a stock at $50 and have a plan to sell at $52. When the price reaches $51, however, you have a strong urge to sell prematurely and lock in profits. When you feel the urge to sell, you may try to pull out your index card, and look at how much money you have lost or want to make. It is useful to repeat to yourself, "I must hold on and see what happens. Only if I stick with my trading plans will I make sufficient profits in the long run." By repeating these statements over and over again, you can slow down your thinking and stick with your plan.
When you think you may lose control and abandon your plan, try to slow down. Stop taking action, and remind yourself of the consequences of abandoning your plan. And try to calm down. If you can relax, slow down, and remember the reasons you want to maintain discipline, you will. And you will make more profits in the long run.
As much as it seems like you may not have control over your impulses, you do. It's all a matter of gaining awareness, and taking precautions to stick with your trading plan. If you have trouble sticking with a trading plan, the first step to gaining control is admitting that you have a problem. When you anticipate that you have a problem sticking with your plan, you will see the need to make a concerted effort to develop strategies to stick with your plan. When you are aware of the problem, you can more easily take precautions that will help you maintain discipline.
If you want to seriously stick with your trading plan, outline the reasons why you want to stick with it. Usually, the best reason is to limit losses. If you have trouble sticking with a trading plan, you might write these reasons down on an index card and be ready to pull it out and read over the reasons when you feel the urge to abandon your trading plan. For example, suppose that you buy a stock at $50 and have a plan to sell at $52. When the price reaches $51, however, you have a strong urge to sell prematurely and lock in profits. When you feel the urge to sell, you may try to pull out your index card, and look at how much money you have lost or want to make. It is useful to repeat to yourself, "I must hold on and see what happens. Only if I stick with my trading plans will I make sufficient profits in the long run." By repeating these statements over and over again, you can slow down your thinking and stick with your plan.
When you think you may lose control and abandon your plan, try to slow down. Stop taking action, and remind yourself of the consequences of abandoning your plan. And try to calm down. If you can relax, slow down, and remember the reasons you want to maintain discipline, you will. And you will make more profits in the long run.
posted by nomadhunter at 8:44 PM
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