Control what you can and stick to your Trading Plan.

Control what you can and stick to your Trading Plan. 

Is this guy smarter than we think?

The thing is:
We already know what we need to know to trade successfully
.
It’s how we put that knowledge together that matters.

So, you want to be the best trader you can be. Firstly, let’s review the two most common downfalls of traders. These are from people who come to me for help – all the time.

  1. Pulling the trigger on the right stocks at the right time. Hesitate, hesitate!
  2. Exiting, to stop a loss from getting bigger or, a profit from getting smaller. Hesitate, hesitate!

Don’t hesitate – Just do it.

What is it we want to do or what is it we want from the market? Do you want to be a hero in front of your mates at your investor meeting? Do you want to get frustrated from making the same mistakes time and time again or do you want to build equity for your family and your retirement? The answer is simple. If we take a positive step towards achieving what we want and trade ‘properly’, the way we should and the way we know – we feel good about ourselves and this builds a self-perpetuating confidence. Review the 5 fundamental Truths of Trading.

You have a choice

Our aim is not to ‘pick the market’ but to be the best traders we can. We choose a target and shoot for it. Forget the ego and the glory. To choose to make the wrong decisions is a choice you make. Our target is trends and we choose a systematic process to maximise their potential. We know the repetitive nature of trends. They don’t ever change.

Mixing strategies can be a dangerous.

Trends are our singular objective. We don’t mix strategies. We don’t make such things as income an additional objective. We may trade income-based stocks to try and improve returns, but the trend is the reason to get in and out not income. Don’t be overly smart and try and build to many rules and exceptions into a trading plan it breeds confusion and it will cost you. It really is a case of ‘if it ain’t broke, you don’t need to fix it’. Keep your focus.

Expectations

This is important and from my position as an analyst / trader who tries to help and educate others via my website, I see a very clear picture. People put their hand up when they’ve made a mistake. It’s often too late, the damage is done. We often, unrealistically, expect too much of ourselves and our trading. So, when we trade trends, we need to understand two things very quickly. 1. We will never get the top and 2. We will never get the bottom. Be happy taking a ‘chunk’ and making a profit.

That is actually common sense because our aim is not to predict but to follow. A trend must develop before we can follow it and we do that because we know trends occur all the time. We can jump on a developing trend when we have the strong probability that there is one and that only happens when we have the evidence that prices are rising and they will already have risen a certain distance. We are not ‘picking’ or ‘predicting’ we are following as is the case when a trend ends. At a stock high we have absolutely no evidence that the trend finishes there. It might be the top, or it might go higher, we simply can’t, or don’t know.

To maximise the opportunity, we let the trend develop to its extreme and wait for it to pull back a certain distance. We still don’t know if we’ve seen the top or not but at some educated ‘fixed’ point we have to take our profit and most importantly be happy with that and move on. This is my edict in my newsletters and videos. I wear my heart on my sleeve and admit to losses as a part of trading. Nasty events occur and that is a part of trading. To think it is possible to eradicate them completely is one of those unrealistic expectations. That doesn’t stop us from getting a little cross with ourselves sometimes and that’s OK just don’t beat yourself up too much but use it as leverage to keep striving to improve your trading with realistic expectations of what can and can’t be achieved.

Trends

They come in different shapes and sizes but are basically the same and will travel in a series of higher highs and lows. This defines a trend. We wait for the confirmation of a developing trend, so we give a bit up for the surety of a trend. Then as a trend develops, we protect the profit by raising the stop. The worst thing we can do here is watch it go down and we will if we don’t have a pre-set ‘get out’ or stop (losing our) profit trigger. Some trends will be big, but some will be small and not develop as we’d ‘hoped’. Treat each on its merits. Hope here is our worst enemy.

It is not about picking the market right because nobody ever does that, no, the focus is purely on protecting capital and generating a return on your capital. Shift your mindset.

How best to go about getting you mindset right so you can approach things differently and in a more positive and constructive way. The best way is a step by step process. You won’t achieve a big change overnight. It’s is done in incremental steps with each positive step along the way rewarding you and convincing you to move forward and eventually the confidence builds until there is no going back. You’ve made the jump. You’ve sent the light. This might sound like a motivational TED talk and it is. One positive step in building your focus and shifting your mindset puts you on the right path.

Market ‘tanks’

Yes, they occur and by trading the stock market we can be exposed to them. 2007/08 is a great example of a major ‘tank’ and more recently in 2020 we hit a major pothole. We need to deal with them in a controlled and disciplined manner. The longer-term benefits of trading a plan will always pay off despite these events. So, when you’re ready to throw your hands up in despair, refrain and review your market mantra that success comes from control and discipline and trading to you plan.

Control what you can.

Knowing you have a trading plan that tells you what to do under any circumstance is a comforting notion. It inevitably drives the right outcomes because trading emotionally without a plan is a stressful psychological experience and this often leads to erratic and bad decision making. To trade with a plan gives us a feeling of ‘doing the right thing’ which is a more positive experience and that builds and develops a strong confidence factor which is vital to the building of our returns and our personal well-being.