Why does your Trading Plan could get you Broke?
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” Abraham Lincoln
While I was reading my favorite sports magazine (the online edition), I’ve noticed a shiny banner: “7 day diet meal plan to lose weight”. The slogan seemed very familiar to me but to be sure it’s not a coincidence I typed “plan to lose weight” on Google. To my surprise, the results all looked the same; everyone was offering plans to help you to lose weight. But every single plan had the same problem: it was limited. There was a 7 days plan, 1 month plan, a couple of weeks plan and so on. Seems like everyone has a plan to lose weight, but what happens when your plan expires and your goal was not yet accomplished? Interesting.
How you can go Broke from Following Other Traders Trading Plan?
I cannot stop thinking of this astounding analogy with the Forex trading plans. Let’s forget the fact that if you type “Forex winning plan” you are going to find thousands of suggestions but my question is: if you find a plan that really works and suits you, why dropping it after 7 days, 1 month, or whatever? I think this is one of the most common reasons why traders are losing money. I know it was for me when I started to trade Forex. Calvin Trillin (he is an American journalist) once said: “Health food makes me sick”. So is this the reason why we quit our trading plan? Are we afraid to get “sick”?
By “sick” I mean we are afraid of success.If you’re going to stick with your trading plan, the result will be, simply, getting sick. Getting broke. While the diet plans are limited by their designers, a trader’s plan – strangely – is limited by the trader himself. No matter which trading style you decide to pursue, you need an organized trading plan, or you won’t get very far. The difference between making money and losing money in the Forex market can be as simple as trading with a plan or trading without one. A trading plan is an organized approach to executing a trade strategy that you’ve developed based on your market analysis and outlook. No trader is right 100 percent of the time. Taking losses is as much a part of the routine as taking profits. You can still be successful over time with a solid trading plan. It took me a while to understand this, as the reason why I quit following my trading plan was because the losses I had. I didn’t realize then that losses are a part of the routine but I do know this now. The people with nice bodies tend to be hardworking and follow a gym schedule. Paradoxically, their goal is not to have a sculpted body but a healthy life. As for Forex traders, their goal should not be the money but to trade well. If they trade right, the money follows them almost afterthought.
Conclusion: Your Trading Plan is suited only for… You!
If you are thinking to start a diet, be sure you don’t cheat and follow your nutritionist’s plan. literally. It’s even harder when you’re a trader because you must also play the nutritionist role. Don’t look for other trader’s plan. What suits for them might not suit for you. Your new journey in the Forex world starts with a good personal trading plan. Here are a few tips for you:
- Write on a paper sheet the reasons why you think you lose money when trading. Read that paper as many times as needed and on another paper write the tools that might help you to avoid those mistakes. That’s your “diet” or your trading plan.
- Whatever happens in the market, stick to your “diet”. You might lose money sometimes but you will earn more on long term.
- There is no perfect trading plan so adjust it (improve it) anytime you feel like but be sure you test it for a long time on a demo account. Only when you are satisfied and consider that cannot be better than that, move on real money account.
- Be sure that your trading plan is realistic and that it fits your trading account size.
- Do not look for approvals or other trader’s opinion on your trading plan. Keep it personal and private.
- Remember that the market is always right and no trading plan works all the time in any circumstances. You have to identify the market conditions you need to apply your strategy.