Let's say you have made a detailed trading plan. You know the appropriate criteria or "rules" that you will use to place trades. You have a list to make sure you follow the rules of each. You have a money management strategy so that you know how much to risk on each trade you, and you know what your risk: reward ratio should be.You know when you will trade, what time frame you want to see, and what currency pair you want to see. You have a prepared spreadsheet to track each trade for further analysis.
In fact, is that this is the easy part. To give an analogy, there are many people who can learn an NFL offense. They can watch movies, go to meetings, and learning a route which will be played by each recipient. However, there are only a handful of people in the world that can run this game by blitzing quarterbacks on top of them in game situations. In other words, very few quarterbacks have the ability to execute.
Of course, the gap between learning to play and play in the NFL quarterback is much larger than the gap between the trading plan and follow it. But the point remains that if we can not implement the plan, then no matter how big the plan. It may seem easy to follow trading plan, especially if it incorporates all of the points I put in the first paragraph. For those of you who were trading with real money, you know that this does not happen.
There are many barriers that prevent most of the traders who have a very good trading plan to follow it properly. Almost all of these psychological factors. Other factors such as the internet is a problem that appears before the issue of trade.Such events are rare, and should be taken into account in the trading plan.Psychological barriers that can take a serious way on trade performance. For those of you who have experience trading, I'm sure you've had a moment where you wonder why you do not make as much money as you should get based on your trading plan. The answer, of course, is that you are human, and humans have emotions.
There are three major mistakes that derail even the best trading plan. The first is to take trades that are not part of the plan. The second is do not trade that is part of the plan. The third error is to change the rules of the trading plan based on events that are not statistically significant.
Trades that are not part of the plan can be very tempting. There are a number of reasons that traders will take a trade that is not part of the plan. You can lose in a row and are desperate to win. You can have the victory in a row and think they are invincible. You can get tips that a major bank to buy yen (keep in mind these tips can be from a bank that tries to sell yen and yen looking for suckers to buy them). You can see something that is part of the classic strategy they've ever heard. You can even bet only for direct entry into the market. All of this dangerous scenario. If you lose, you feel miserable because you know you are breaking the rules and fees.Which can cause psychological damage. If you win the trade, which only encourages you to continue the behavior that would not be profitable in the long run.
Passing trade is part of the plan is the second most common mistake. This happens for many reasons. Maybe you've lost two and a row and afraid to take another trade, only to see whether your trade will win big. Or you've won three times in a row and think that the victory did not last for long. Regardless of the cause, is also very dangerous. It is uncommon for a trader to get past emotional trade in accordance with their rules and end up winning, simply place trades that are not in accordance with their rules and end up losing. This error is why most traders do not maximize the results of their trading plan.
Changing the basic rules on small sample sizes may trade the worst thing you can do. Say you have placed 300 trades with your current rules. Although you have ups and downs, it has become a profitable strategy. Then let's say you lost 5 consecutive trading, which could happen. Suddenly you change the time of test rules which have survived in hundreds of trade based on the sample size. Overreact to small samples of trade can lead you to dangerous road. If you change the rules to accommodate a fifth defeat it, you might end up losing far more than if you stay on track. Of course, it is prudent to reevaluate the rules from time to time. But do not make major changes based on the five trading.
Hopefully these examples will help you stay and follow your trading plan. If you ever asked yourself why you are all lucky that you plan where you are supposed to win big, try reading to see if any of these stories is true. Better yet, learn from examples and stay disciplined from the beginning....
In fact, is that this is the easy part. To give an analogy, there are many people who can learn an NFL offense. They can watch movies, go to meetings, and learning a route which will be played by each recipient. However, there are only a handful of people in the world that can run this game by blitzing quarterbacks on top of them in game situations. In other words, very few quarterbacks have the ability to execute.
Of course, the gap between learning to play and play in the NFL quarterback is much larger than the gap between the trading plan and follow it. But the point remains that if we can not implement the plan, then no matter how big the plan. It may seem easy to follow trading plan, especially if it incorporates all of the points I put in the first paragraph. For those of you who were trading with real money, you know that this does not happen.
There are many barriers that prevent most of the traders who have a very good trading plan to follow it properly. Almost all of these psychological factors. Other factors such as the internet is a problem that appears before the issue of trade.Such events are rare, and should be taken into account in the trading plan.Psychological barriers that can take a serious way on trade performance. For those of you who have experience trading, I'm sure you've had a moment where you wonder why you do not make as much money as you should get based on your trading plan. The answer, of course, is that you are human, and humans have emotions.
There are three major mistakes that derail even the best trading plan. The first is to take trades that are not part of the plan. The second is do not trade that is part of the plan. The third error is to change the rules of the trading plan based on events that are not statistically significant.
Trades that are not part of the plan can be very tempting. There are a number of reasons that traders will take a trade that is not part of the plan. You can lose in a row and are desperate to win. You can have the victory in a row and think they are invincible. You can get tips that a major bank to buy yen (keep in mind these tips can be from a bank that tries to sell yen and yen looking for suckers to buy them). You can see something that is part of the classic strategy they've ever heard. You can even bet only for direct entry into the market. All of this dangerous scenario. If you lose, you feel miserable because you know you are breaking the rules and fees.Which can cause psychological damage. If you win the trade, which only encourages you to continue the behavior that would not be profitable in the long run.
Passing trade is part of the plan is the second most common mistake. This happens for many reasons. Maybe you've lost two and a row and afraid to take another trade, only to see whether your trade will win big. Or you've won three times in a row and think that the victory did not last for long. Regardless of the cause, is also very dangerous. It is uncommon for a trader to get past emotional trade in accordance with their rules and end up winning, simply place trades that are not in accordance with their rules and end up losing. This error is why most traders do not maximize the results of their trading plan.
Changing the basic rules on small sample sizes may trade the worst thing you can do. Say you have placed 300 trades with your current rules. Although you have ups and downs, it has become a profitable strategy. Then let's say you lost 5 consecutive trading, which could happen. Suddenly you change the time of test rules which have survived in hundreds of trade based on the sample size. Overreact to small samples of trade can lead you to dangerous road. If you change the rules to accommodate a fifth defeat it, you might end up losing far more than if you stay on track. Of course, it is prudent to reevaluate the rules from time to time. But do not make major changes based on the five trading.
Hopefully these examples will help you stay and follow your trading plan. If you ever asked yourself why you are all lucky that you plan where you are supposed to win big, try reading to see if any of these stories is true. Better yet, learn from examples and stay disciplined from the beginning....
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