Do you have a trading plan?
I’m sure many trading gurus have told you about treating your trading as a business and in order to do so, you must have a trading plan. They tell you that every business has a plan.
The problem is that they rarely tell you that most businesses fail. In fact 4 out of 5 businesses fail in the first 5 years.
So is having a trading plan THE solution to all our trading troubles?
Well… having a business plan does not guarantee you any success in your business. Likewise, having a trading plan, although an absolute prerequisite to success, does not guarantee you success in trading either.
What do we need then? Are we condemned to failure?
Indeed you need to have a business/trading plan, but most importantly you have to identify your thoughts. A trading plan does not help unless we have the proper trading psychology.
A good way to start working on our trading psychology is by identifying the difference between an opportunist and a strategist.
The opportunistic way of thinking generally is not based on goals but on grabbing an opportunity as soon as it arises.
The strategic trader has an end in mind; he has a vision.
An opportunistic trader who usually struggles is busy looking for opportunities everyday and he/she takes action in everything that looks appealing.
A successful trader on the other hand knows his vision, he develops different alternatives for its accomplishment and chooses the trades with the highest probability of success. He asks himself what are the best opportunities to achieve his vision.
So yes! Let’s treat trading as a business. A true business man – regardless his business – has a clear vision of what he wants his business to become. it is because of that vision that he can identify and analyze his own strengths, his weaknesses, the market place, and devise different strategies for achieving that vision, or look for the right help.
Are you an opportunistic trader or a strategist?