“Plan your trade and trade your Plan” is an old adage on Dalal/Wall street.
Planning your trade and trading that plan are 2 totally different things. Most of us are adept at making a fairly decent trading plan. Let me digress for a moment here. Most traders DO NOT have a plan. The earlier statement was for those who do. Ok, back to the topic now.
The following are a few basic pointers of a trading plan.
- You know which stock(s)/index(s) you are going to trade.
- You roughly know where you are getting in.
- You know the Stop Loss and Trailing Stop Loss for the trade.
- And finally, you know when to get out.
Now, that is the most basic trading plan. A simple yet effective plan. Yet, why do traders lose money. I mean, money more than their Stop Loss amount. I am reminded of a line written by Bob Dylan which says “The answer my friend is blowing in the wind, the answer is blowing in the wind”. The answer is Lack of Discipline. Discipline to stick to your plan. Discipline to be honest to yourself. Discipline to admit you are wrong. Discipline to pull the trigger. Discipline to take profits. This last one surprised you din’t it?? You know your profit target has been achieved yet you don’t cut the position. You hold on to it thinking it will go up. That’s when Discipline’s step brother Greed comes in the picture. Greed is what doesn’t let you take profits and the trade ends up being a losing one.
Trading in the stock market is not Rocket Science as many analysts or financial media makes it out to be. Trading is an activity where you stand to gain financially by sticking to your trading plan. Discipline is the fuel which runs the trading system (if you have one).
So the million dollar question is how do you develop discipline. Again it’s not Rocket Science. Only YOU can develop your discipline. Why? Because ONLY YOU are responsible for your trading success. It could be as simple as having a snippet of your trading plan stuck to your monitor screen which keeps reminding you to follow your rules. You could promise yourself a treat if you followed your trading plan. The list is endless. Only YOU can inculcate discipline in yourself.
Trust me, if you don’t have DISCIPLINE in this game, you are going to be dead and gone in no time. I have seen many so-called traders eat dust just because they did not have the discipline to trade. Trading is one of the most difficult and competitive activity there is. Period. You will need all the discipline to fight it. It has to be a major weapon in your armoury.
Go on. Take the first step. Use your imagination. Get disciplined.
To your Boring Success!!!