5 Reasons Why Traders Struggle to Create a Winning (Trading) Plan

When traders start their trading career, they are often told 2 extreme truths about trading, that is (1) you can make lots of money and (2) you can lose all your money in the financial markets. Many traders are imprinted with these trading extremes but were rarely told what happens in between. Hence, without knowing what happens in the middle, how can one plan how to move away from losing and how to move towards winning? Unless the trader has good mentors or good trading buddies/friends, they usually get taken for a ride before they get their own bearings right.

With that, this week’s article is to highlight some of the areas where traders fail to grasp in order to write, not just a good trading plan but, a Winning Trading Plan.

1. Information Overload

However, the fact that traders are curious also creates other problems. One of them that severely affects your trading plan is that you might get information over-loaded quite frequently.

Again, that’s not a surprising story as many new traders search through piles and piles of resources looking for the Holy Grail of making money. Along the way, you collect information that you think may be useful. However, if you collected too much, you fail to digest them properly. What is worse than that is when traders clogged up their “To Do/Learn/Read” list, you end up constantly chasing for more time. In the end, traders only go in circles (wanting more time and more knowledge) but achieves nothing.

You can agree with me on this, can't you?

If yes, here’s something even more interesting. Because traders feel the need to know more (from your collection of resources), you would often put your trading plan aside until you feel you have finished learning. With that, your trading plan is either done halfheartedly or you would only make minor improvements when you get a losing streak.

2. Vague Idea of What You Want

i. Trading Plan is More than just a Checklist

In other words, some of you don’t know or are not certain of what you are looking for in this rewarding yet challenging career.

Let’s elaborate this even further. Some traders would set their trading goals as, say, Happiness. However, that is not  a goal. In fact, happiness is a state. Being happy is a state of mind and, hence, it does not represent what you really want.

Here's an example of how this can become a problem. For some traders, they can be happier having a secure day job instead of trading for a living. This is not surprising because some people need security and a fix salary makes them feel good. If that’s the case, they rely on their day job for income and have no motivation to take trades (even though they want to use trading income to help them leave their job). This then causes the trader to freak out right before they place a trade because of fear-of-pulling-the-trigger. In the end, that also becomes the root cause that holds them back from becoming a successful traders.

Can you see how a vague goal of wanting to be happy can work for and against you?

ii. Lack of Certainty in Your System

Many traders write decent or even good plans for your trading system. However, the same traders would still struggle to have a winning trading plan.  That’s usually because many traders do not realised the importance of having certainty in their system.

I often talk about system beliefs (if you have not heard of it, you can read about it in my free ebook) and one of the most important thing about this belief is that you need to belief thoroughly in your trading system.

In case you’re not aware, having certainty in your trading system is like knowing that the sun will still rise tomorrow morning. When you have certainty in your system, it means you trust your rules, your entries/exits and your have no doubt that you are doing the right thing. However, this can only be created through hard work in back testing, forward testing and coaching.

As you can see, if you don't have that level of certainty in your trading plan, it means that you only have a vague idea of what you want from the market, which means you don't have a winning trading plan yet.

3. Purpose

If you have resolved the issues in Pt 2 from above, you should have a clearer idea of what you want. This should include what you want from trading and from the market. Unfortunately, knowing what you want is only part of the equation because knowing what you want does not mean what you want is right for you.

Let's try to break it down a little more to give you a better understanding of my point.

i. The Bigger Picture

Now, take one step back and, by looking at the bigger picture, ask yourself these questions:

• Why do I want $1 million? And
• Why is that important to me?

ii. Why These Rules?

I mean isn't it great to know why? But, more important than that is that you need to be convinced that trading with the trend is the right thing to do. Because, when you are convinced that you are doing the right thing, that will help remove any doubts inside you and that indirectly removes  many negative emotions and other associated problems that you may have.

You see, if you are very certain of what you are trading and you are convinced that it’s the right way to become successful, you will take massive actions to achieve those goals. And this leads me to my next point.

4. Taking Massive Actions

You must be wondering, what does taking massive action have to do with a trading plan?

I'm going to be honest here, the chances are you are not going to get your trading plan right the first time round. Well, that’s the unfortunate truth about writing trading plans. It is a continuous developing process because you will continue to learn about yourself as you progress. By that, I mean, you will learn your strengths, your weakness and even technical knowledge about your favourite system as you trade the market. Hence, every time you grow as a trader, those trading plans will change, they need to change to fit in the new knowledge that you've acquired.

However, you cannot gain new knowledge unless you take massive actions. Just to be clear, taking massive actions does not require taking massive trading risks. All it means is that you need to follow your trading plan as diligently as possible so that you can gain new lessons from it. Hence, taking action will help you develop your trading plan from a good one to a winning one.

Many traders fail in this area because, more often than not, they deviate from their trading plan (for various reasons). In the end, they struggle to make constructive comparisons of what actually happens with their original plans. Do you see my point?

5. Celebration

As a NLP practitioner, I strongly encourage traders to celebrate when you are doing things right. It doesn't even matter if you just have a pat on your own back because every time you celebrate, you are reminding yourself about your ability to achieve goals and challenges laid out in front of you. You need to remind yourself that you can do it and you have the ability to do it again in the future. In fact, set down targets in your trading plan so that you will remember to celebrate each time you reach those targets.

Celebrations, no matter how small they are, needs to mean something to you and that will only encourage you to take even bigger actions. These memories are not ideas to encourage the feeling of over-confidence or arrogance but they are most important during rainy days – days when you are feeling down or when you are going through some rough patches.

In other words, when you are feeling down, you remind yourself that rainy days are inevitable but you know deep inside you that you have been successful before you are able to do it again.

Conclusion

Hopefully the 5 areas mentioned in this 2 part series article will provide some good insight to why traders struggle to have a winning trading plan. I do hope it will help you to create a great one for yourself. Once you have that winning trading plan, get someone else to check your plan and make sure that he/she is able to remain objective.

If you have a trading plan but need a mentor of review your plan, please feel free to check out my coaching service.  

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