Top Ten Trading Mistakes/Solutions - Part 2– Mistakes # 4 The Plan 

Last week we covered three topics related to trader mistakes from the top ten that come up repetitively in my conversations with traders.

Mistakes that apply to new traders will be marked will “N” where as all the rest apply to all traders at any trading level but all are important to be aware of.

Mistakes

#1(N) No Financial Preparedness

#2 (N) A Solid Trading Strategy  - There is none or too many

#3 – Trading is Easy – early wins

Mistakes will be list in priority order with the most important being the last. 

As a reminder here is the Re-Cap of 1 through 3:

·        Have a plan for how your money is spent in your trading day and life

·        Set up rules to stick to the plan

·        Minimize your losses and manage them

·        Focus on one strategy till it’s mastered

·        Become a “digger” and fine tune each trade

·        Trading is what you make it, have fun and learn

·        Be a learning sponge

·        Be flexible and change with the markets

Mistake #4 - No Game Plan

This one always amazes me! 

No game plan to go by really does have an affect on the traders’ ability to succeed.  In fact, I can honestly tell you that having a trading plan is the number one characteristic the very best traders DO possess.  It’s their success road map and the more defined the better.

Not having a plan, leaves the outcome to chance verses being able to change within the trading year if things don’t work. That’s part of the power of any plan. To set a predetermined series of events in motion that will generate a specific desired outcome.  If the plan is not materializing as planned measures can be taken to change.  At the end of the year there is no excuse for NOT reaching ones goal because any change at this late stage is impossible.

Now, most would think a trading plan would be simply determining ones strategies, a measurement for risk reward, amount to risk per trade, profits for the day, month, year and bang, you’re done.  Wrong! Great trading plans are all encompassing.  So here is a snap shot of items you may want to include in your new plan. Keep in mind, depending on how much you are trading will determine the components of your personalized plan. Some want –to-be traders start while they are still working another job. Those plans will need a “transition” strategy as well. These possible components will give you start and at least get you thinking.

What’s the Answer

First answer one question that will create leverage for your overall trading.  Don’t just think of it, but really take some time and write it down. For some reason I can’t explain, when you write something down something magical happens and it naturally comes to be. 

Define the Why

A good place to start your plan is to answer this question, “Why am I trading?” and be sure to include:

“What will you get out of it?”

“What will it bring into your Life”

“What will it do for my family?”

and any other question that will get you jazzed.

Plans are Magical

I realized this when I wrote my first plan after I moved to Vegas, not an easy decision to make since I was still recovering from 911 events.  I took my time and rewrote my whole business plan that included my trading.  I started working my plan for a few months and for some reason, I can’t remember, I forgot all about the plan. The following year came around and I said again to myself,  “Self it’s time to do a plan.”  When I went to do a search on my PC search I came across the plan I wrote the year before and had forgotten.  Low and behold EVERYTHING on the plan happened and some parts even better. Again I am not sure why this happens I only know it works.  Writing the plan is magical and it’s powerful! Take the time to do it and you won’t be sorry but amazed at the results.

Create Your Magic

1. Define your goals for:

>Trading profits – daily, weekly, monthly, yearly

>Trading Losses – for the day or week with rules to get back on track

Ø      How to get back on track

Ø      What did you learn from the last mistake

2. Define the markets you will be trading by breaking down into as much detail as possible. (If you trade more than one market be sure you have a separate plan for each as each is very different)

3. Define the parameters for the trade to work

4. Determine the account size you will need to trade daily in your selected markets.

5. How many contracts will you trade?  A good rule trade one contract or some ratio of three. Example: 1 - 3 - 6 - 9 

6. What are the defined set-ups you will use in the markets you trade?

7. What are your rules should you lose? Your goal is grow the account and preserve your cash. If you are not moving in a forward direction than something is wrong and changes need to be made.

8. Tracking your trades. It’s very important when you are trading to track your trades and details.  The details can flush out anomalies that can improve your results.

9.Be honest with your results and face your losses. Keep a journal of your trading results. Create a form that makes tracking easy.

10. Define (3) new things you learned in the day and re-read this the next day before you begin. This will speed up the learning curve.

11. Create a great trading atmosphere so you can enjoy what you’re doing.

12. Reward yourself when you do well.  This is important and it will help you mentally to know you did well and something good is coming.  Besides you deserve it! Right?

I know there is more that should be included and more details to cover.  Either figure them out for customized plan or wait for my book. LOL

AND

In the mean time Great Planning and Trading!