Habit #7: Plan the Trade and TRADE THE PLAN

One of the most common causes of failure is the habit of quitting when one is facing defeat.

Next time, think of the adage:

- Combine time (at least 2 years) with perseverance and a strong desire to win!

Over the past 20 years working with many traders, I have learned that these 10 habits will help you take your trading to the next level. To illustrate this point, I’m going to introduce you to two traders, frustrated Fred and successful Steve. Fred has fallen into the technical traders trap. Fred is “out of shape” with no business plan or trading goals. He trades emotionally and would rather search the net for the next latest and greatest trading system out there then buckle down and focus. Steve used to be a technical junkie but he is transformed into a successful entrepreneurial trader.

Last week, Fred learned how Steve follows a system. This week, let’s learn another aspect of what Steve did to become successful.

Habit #7 – Plan the Trade and Trade the Plan

The path to greatness lies not only in our performance, but also in the systematic practice we put into the performance. Trading mastery is a function of internalizing market patterns, rehearsing execution skills for trade entries and exits, and learning from constant market feedback. Without a trading plan, our emotions get in the way and we run the gamut of fear and greed. Planning the trade and trading the plan is the practice you need to develop solid habits.

For example, in reviewing my trades, I find that the more profitable ones are those in which I knew what I was pursuing. Even when such trades do not work out, the losses are held to a minimum because I quickly realize that what I was looking for is not there and exit to preserve my capital. On the flip side, all trades in which losses are far greater than they should be have one thing in common. They all have the ingredient of confusion and not knowing exactly what I was looking for in the trade. When you don’t have a plan, it is too easy to let small losses turn into larger losses and then sell at the bottom or buy at the top just to get rid of the pain.

I created a Trading Blotter to Plan the Trade and Trade the Plan. The first thing I do is a checklist – top down approach – start with daily, go to hourly and then 15 minutes. I use the hourly chart for swing trades and the 15 minute chart for day trades. I look at a list of several potential trade confirmations to decide whether the trade in question has a high or a low probability of succeeding. Then it’s a question of executing the trade. Traders love this FX Trading Blotter which they receive in the 2‐day seminar because it is a great tool to use to remove that emotion from the trade.

Habit #7 – Plan the Trade and Trade the Plan

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