15
2024/05
Why should you overcome laziness in trading plans?
Anyone who knows how to trade understands the importance of having a plan. However, some traders, despite knowing this, are too lazy to actually create and execute a proper trading plan, claiming that “the plan is in their mind” as they recklessly navigate the market.
So, what role does a trading plan play in trading? Can you afford to be lazy?
A Trading Plan Can Help You Improve
The essence of trading, for speculators, is simply about what you are willing to risk and what you hope to gain (how you risk and gain is a matter of trading technique).
If you have yet to form a strict trading plan before entering a trade and only have a vague framework in your mind, the market’s price fluctuations will make it difficult to determine how much you are willing to risk or what you really want to gain. Everything becomes nebulous.
This can result in not stopping losses when you should, not holding positions when you need to, not entering the market when it’s the right time, and being left with endless regret.
Because of this regret, you might even develop the illusion that as long as you stick to your viewpoint, strictly follow your plan, and avoid regret, you will achieve success.
For almost all investors, if you have yet to establish a strict trading record and plan, your mind will be filled with memories of the trades you saw correctly but didn’t execute.
As for the trades you saw incorrectly and didn’t execute, you’ll soon forget them. Only by establishing a strict pre-trade plan and post-trade record can you genuinely reflect on yourself, summarize your experiences, and improve, allowing you to evaluate yourself and the market objectively rather than relying on fragmented memories to judge yourself.
A Trading Plan Helps You Stay Objective
At first glance, creating a trading plan seems purely subjective. How can it be an essential tool for maintaining objectivity?
Indeed, planning is subjective, but the most important aspect is that the plan is not based on market predictions. It is not created because we predict the market will rise and thus decide to buy.
Instead, it is based on how we will react to various market changes. In other words, a trading plan is a contingency plan, not a predictive plan.
Once you’ve created a contingency plan and accepted it, you clearly understand the risks and profits associated with it. As long as the market signals align with your plan, you can confidently execute it, even if it seems like it might be wrong.
You will understand the cost of any mistakes and whether these costs are within your tolerance, thus avoiding being unsettled by the market’s chaotic fluctuations.
A Trading Plan Minimizes Unnecessary Trades
Creating a trading plan can also minimize arbitrary and unnecessary trades. Trades that make it into your plan are certainly well thought out and worth executing rather than being driven by the market’s chaotic fluctuations.
With the constraint of a trading plan, you will have a clear target to wait for, preventing aimless monitoring and waiting.
The process of making a trading plan is also a process of carefully analyzing and studying the market. To understand market signals, you must consistently engage with the market daily.
Engaging with the market involves making plans, observing the outcomes, summarizing, and maintaining this cycle. Improving your trading skills comes from long-term persistence and diligent accumulation.
With the same trading experiences, a person who is more diligent and better at summarizing will undoubtedly improve faster than someone who isn’t.
Over time, you will find that the results of trading with a plan versus without a plan are vastly different. So, do you still want to be lazy?
