What is a trading plan and do you have one? Are you following it? When the consequences are high enough I know you will, until then you will likely trade aimlessly.A trading plan is a set of rules which you follow each time you trade a stock or commodity. Following a trading plan is boring and restricts you. It limits your creativity and spontaneity. Yet in the long run, boring as it is, it should keep you profitable. Can’t follow a trading system? I think you can, you just choose not to. Checkout find the full article here for more info.
You might think you do not have the discipline to follow a trading plan. Think again. When was the last time you ran a stop light? For many drivers they have never run a stop light. I do not recall ever running a red light although I did miss a stop sign about 30 years ago that was essentially hidden behind a tree. We stop at stop lights or stop signs because those are the rules of the road and when we do not follow them there is a high probability that a negative consequence will likely result. Some of these consequences could include: death, severe injury, injures to someone else, the destruction of our car or a major fine and loss of points.
So since you routinely stop at stop lights and stop signs it is clear that you can follow instructions and have discipline provided the consequences are high enough.Now, think of the number of times you have not followed your stock trading plan. My guess is that you likely deviate from your trading system regularly. You may not even have a trading plan, which is even worse.
Why do you think you cannot follow your trading plan? There are likely many reasons some of which might include: no one is watching so there is no fine to face, you are the only one who will get hurt, your plan consists of rules, not laws, you many have benefited in the past by not following your plan and when you follow the trading plan and lose you would be totally responsible as you followed your rules.When you are totally responsible for the trade then you can only blame yourself for a loss. Without someone or something to blame your loss on you actually may realize that you need to make some changes in your trading and you may not want to do that.
The negatives of not following your trading plan are generally monetary and emotional. By following your plan you know you will lose money when a trade goes against you yet by not following your plan you hope the position will turn around.From an emotional point of view, I think people would prefer to take instant pleasure and delayed pain. This is exactly what most people do on a daily basis when given the choice.
Since your daily lives have been structured around instant pleasure and delayed pain for so long it is natural for you to continue this into the trading arena. I think this is a mistake and it is quite difficult to make the switch. In trading we should delay gratification and suffer instant pain. This basically is another way of saying ride your winners and sell your losers.
How you make this switch is up to you. Looking at your life you will find that there are rules, instructions and laws, which you follow so you know you can do it. You just need a solid reason for doing it while you trade.