The Trading Plan

BarrosMetrics Views: The Trading Plan

Trading success depends on the three factors mentioned in the previous blogs:

Winning Psychology x Effective Risk Managment x Written Plan (with an edge)

While I consider a written plan the least important of the three, it nevertheless is a requisite for  success.I place a ‘multiplication’ sign between the elements to highlight that you need all three.

The plan comes into its own when a trader attains a measure  of self-awareness necessary to consistently execute his risk management and trading rules. In this blog, I’ll examine and consider the differences between a simple and complex but deeper approach.

Ultimately the efficacy of a plan depends on two interleaving factors:

  1. How well the plan suits a trader’s personality and
  2. How well the plan reflects reality so that it delivers a high incidence of profitable trades over a large sample size.

In effect,  the plan’s efficacy is dependent on how well a trader sees “the outcome  there as correctly seen by his internal interpretations’.

As a visual trader, I rely on pattern recognition to provide the high probability trades. My path to self-knowledge was strewn with difficulties; and if I had to do it all over again, the one aspect I want to  change would be the outcome I’d seek at the beginning.

I started with the idea that to succeed, I had to understand the ‘Nature of Markets’. This meant I started seeking to trade with a highly subjective component. And the problem with that is as humans we have a capacity for self-deception.

(to be concluded tomorrow July 8)

4 thoughts on “The Trading Plan”

  1. Excellent ideea, it works perfect mostly thats what I`m doing for 2 years, I`ve had some problems but not with plan only with my mental state the plan works smoothly as long as one manages to keep his head. Still its not easy at all human nature its just not prepared for what trading the market will unfold I felt it on my own skin and hopefully learned some lesseons… forever… because if it happens again even in 10 years from now then it means I learned nothing or I learned and forgot and its so easy to go off road that if one does not spot it at time it might be 2 late very fast.

  2. Hi Paul

    Thanks. Every success.

    Don’t be too hard on yourself if the lessons repeat. I believe as traders, given our human nature, we have to be constantly watchful to ensure that reason and emotions work together -and that is far from easy.

  3. Good advice on trading plan. From my experience creating a trading plan is only the first step, the most important thing is to follow it. I suggest new traders to mark down any trade that didn’t meet the trading plan and analyze at the end of the month how many times they failed to follow it.

  4. Hi Firepips

    I agree which is why at the Habits of Success preentations I teach a quantative approach as part of the journal keeping – it helps the newbie identify if and where he is not following his rules.

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