How many times have you heard someone say that? How does it apply in trading?

One of the biggest psychological challenges we face as traders is making a plan and then sticking to it. We usually see the potential target when we first enter a trade but as my Mom used to say… after a little while we can’t see the forest for the trees.

We become distracted and loose sight of our original goal in a trade. We get caught up in the fear of loss. If we are in profit when we re-examine the trade we fear loosing what we have gained short term and get out too soon, or if in draw-down we fear loosing more. In both cases fear drives us to make a short term decision contrary to our original gaol. We must fight the resistance of closing the trade without re-checking our plan and where our goal is set. If you can follow this one simple rule of no trading without review of the plan you could be on your way to lager profits.

Trading is unlike anything else we do for money. If we are working for someone or a company and we work for a week, even if we leave after that week we are usually still paid for the time we put in and loose only  future earnings. But in trading this is not the case. Trades can often go into profit by 100’s of pips only to retrace back to negative or worse, hit our stop as a loss. So this is akin to working for a week not knowing if we are going to be paid AND in fact we may have to pay money at the end of that week. Not one of us would work on that basis for anyone would we?

So how do we overcome this problem? What do we need to change in ourselves and how do we do that? Well… it’s back to developing discipline in order to make progress. We need to change our programming by creating new experiences we can trust. In order to do this we have to start with one very basic rule. Do not make any trade unless your plan is documented. With an entry point, a stop-loss point and a profit point. At the top of this plan write down:

I will remain in the trade to my target goal or in the case of a loss, I will accept it as a risk well managed. (Of course you must use good money management of less than 2% risk of your account and look for opportunities that reward better than 1:1 Risk/Reward ratio)

Make it a win either way. When we learn to accept both losses and wins as forward momentum in our trading we will then see acceleration in the capital of our accounts.

Here’s the opportunity on the EUR/JPY



We appear to have a proper triangle unfolding that at this time is providing a few different possibilities for trades. If the assessment is correct, we should see a return close to the bottom trend-line, so a sell here is appropriate. At the bottom trend-line we should see a reversal and should buy as then new highs above the upper trend-line should print. Remember good money management and stop-loss use.

Good trading.