5 Reasons Why Traders Struggle to Create a Winning (Trading) Plan – Part 2

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In case you haven’t done so, please read Part 1 of this 2-part series here.

3. Purpose

Now that we’ve gone through you the What, its time to look at Why you have what you have (in the trading plan)?

If you have resolved the issues in Pt 2 from above (see last week’s article), you should have a clearer idea of what you want. This should include what you want from trading and from the market. Unfortunately, knowing what you want is only part of the equation because knowing what you want does not mean what you want is right for you.

Let’s try to break it down a little more to give you a better understanding of my point.

i. The Bigger Picture

big_bananaLet’s say you managed to update your trading goal and, instead of “Happiness”, you now have a goal of reaching a profit of $1 million in 5 years and you feel that you will be happy once you have that profit. Great!

Now, take one step back and, by looking at the bigger picture, ask yourself these questions:

  • Why do I want $1 million? And
  • Why is that important to me?

You see, having a real goal is when that goal means something to you. Wanting $1 million on it’s own does not mean much unless you can use the money to contribute positively to your live or to your loved ones. For example, if a trader wants that money so that his children won’t have to live in  slumps any more, that will be more meaningful than to someone who wants the money to buy a sports car just for fun. Do you see my point?

ii. Why These Rules?

Moving away from the bigger picture, let’s go back to some basic stuff too. In a typical coaching scenario, you may find that some coaches who teach traders to trade with the trend only. It’s great if you accept it but do you know why trading with trend is more profitable? If you don’t, please go ask your coach. 

I mean isn’t it great to know why? But, more important than that is that you need to be convinced that trading with the trend is the right thing to do. Because, when you are convinced that you are doing the right thing, that will help remove any doubts inside you and that indirectly removes  many negative emotions and other associated problems that you may have.

You see, if you are very certain of what you are trading and you are convinced that it’s the right way to become successful, you will take massive actions to achieve those goals. And this leads me to my next point.

4. Taking Massive Actions

One of the reasons why traders struggle to create a winning trading plan is because they fail to take massive actions. Or simply, they fail execute their plans.

You must be wondering, what does taking massive action have to do with a trading plan?

I’m going to be honest here, the chances are you are not going to get your trading plan right the first time round. Well, that’s the unfortunate truth about writing trading plans. It is a continuous developing process because you will continue to learn about yourself as you progress. By that, I mean, you will learn your strengths, your weakness and even technical knowledge about your favourite system as you trade the market. Hence, every time you grow as a trader, those trading plans will change, they need to change to fit in the new knowledge that you’ve acquired.

However, you cannot gain new knowledge unless you take massive actions. Just to be clear, taking massive actions does not require taking massive trading risks. All it means is that you need to follow your trading plan as diligently as possible so that you can gain new lessons from it. Hence, taking action will help you develop your trading plan from a good one to a winning one.

Many traders fail in this area because, more often than not, they deviate from their trading plan (for various reasons). In the end, they struggle to make constructive comparisons of what actually happens with their original plans. Do you see my point?

5. Celebration

Yes, you need to celebrate once in awhile and make sure to only celebrate for the right reasons. Celebrate if you have a winning trading plan and you are able to follow it meticulously. However, do not celebrate if you are profitable even though you broke all your trading rules.

As a NLP practitioner, I strongly encourage traders to celebrate when you are doing things right. It doesn’t even matter if you just have a pat on your own back because every time you celebrate, you are reminding yourself about your ability to achieve goals and challenges laid out in front of you. You need to remind yourself that you can do it and you have the ability to do it again in the future. In fact, set down targets in your trading plan so that you will remember to celebrate each time you reach those targets.

Celebrations, no matter how small they are, needs to mean something to you and that will only encourage you to take even bigger actions. These memories are not ideas to encourage the feeling of over-confidence or arrogance but they are most important during rainy days – days when you are feeling down or when you are going through some rough patches.

In other words, when you are feeling down, you remind yourself that rainy days are inevitable but you know deep inside you that you have been successful before you are able to do it again.

Conclusion

If you believe in trading psychology, then you should know that having winning trading plans will provide a great stepping stone to having great trading psychology.

Hopefully the 5 areas mentioned in this 2 part series article will provide some good insight to why traders struggle to have a winning trading plan. I do hope it will help you to create a great one for yourself. Once you have that winning trading plan, get someone else to check your plan and make sure that he/she is able to remain objective.

If you have a trading plan but need a mentor of review your plan, please feel free to check out my coaching service.

Thank you and please leave any comments or feedback at the bottom in the comment box.

 

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