5 Reasons Why Traders Struggle to Create a Winning (Trading) Plan – Part 1

Writing a trading plan is probably one of the most daunting activities that many new (and seasoned) traders face even though it is an important aspect of trading. Traders struggle because all they do is write what was given to them i.e. system rules and usually nothing more. With all honesty, I don’t blame them as I did exactly that when I started.

When traders start their trading career, they are often told 2 extreme truths about trading, that is (1) you can make lots of money and (2) you can lose all your money in the financial markets. Many traders are imprinted with these trading extremes but were rarely told what happens in between. Hence, without knowing what happens in the middle, how can one plan how to move away from losing and how to move towards winning? Unless the trader has good mentors or good trading buddies/friends, they usually get taken for a ride before they get their own bearings right.

With that, this week’s article is to highlight some of the areas where traders fail to grasp in order to write, not just a good trading plan but, a Winning Trading Plan.

1. Information Overload

Most retail traders have a great gift and that gift is probably one of the main reasons (though not the only reason) they have ventured into the arena of trading the financial markets. The gift that I’m referring to is that most retail traders have a curious mind. If you think about it, without the curiosity, you may not have even considered trading for side income and would not have gone exploring the opportunities outside of your normal career options. Right?

However, the fact that traders are curious also creates other problems. One of them that severely affects your trading plan is that you might get information over-loaded quite frequently.

Again, that’s not a surprising story as many new traders search through piles and piles of resources looking for the Holy Grail of making money. Along the way, you collect information that you think may be useful. However, if you collected too much, you fail to digest them properly. What is worse than that is when traders clogged up their “To Do/Learn/Read” list, you end up constantly chasing for more time. In the end, traders only go in circles (wanting more time and more knowledge) but achieves nothing.

You can agree with me on this, can’t you?

If yes, here’s something even more interesting. Because traders feel the need to know more (from your collection of resources), you would often put your trading plan aside until you feel you have finished learning. With that, your trading plan is either done halfheartedly or you would only make minor improvements when you get a losing streak.

2. Vague Idea of What You Want

This is another pretty typical issue found in trading plans. In truth, this can be found in 2 areas within the trading plan. So let’s go through them one at a time.

i. Trading Plan is More than just a Checklist

Firstly, many traders fail to differentiate between a trading plan (which is similar to a business plan) and a plan for their trading system (a.k.a. system/rules checklist). You see, many focus on what they want from the market but rarely do they focus on what they want from Trading (as a career).

In other words, some of you don’t know or are not certain of what you are looking for in this rewarding yet challenging career.

Let’s elaborate this even further. Some traders would set their trading goals as, say, Happiness. However, that is not  a goal. In fact, happiness is a state. Being happy is a state of mind and, hence, it does not represent what you really want.

Here’s an example of how this can become a problem. For some traders, they can be happier having a secure day job instead of trading for a living. This is not surprising because some people need security and a fix salary makes them feel good. If that’s the case, they rely on their day job for income and have no motivation to take trades (even though they want to use trading income to help them leave their job). This then causes the trader to freak out right before they place a trade because of fear-of-pulling-the-trigger. In the end, that also becomes the root cause that holds them back from becoming a successful traders.

Can you see how a vague goal of wanting to be happy can work for and against you?

ii. Lack of Certainty in Your System

certaintySo that was the first issue, now comes the second issue – your System Rules.

Many traders write decent or even good plans for your trading system. However, the same traders would still struggle to have a winning trading plan.  That’s usually because many traders do not realised the importance of having certainty in their system.

This is a section in my transformation program where I talk about beliefs and certainty of your system in great detail, and one of the most important thing about this belief is that you need to thoroughly believe in your trading system.

In case you’re not aware, having certainty in your trading system is like knowing that the sun will still rise tomorrow morning. When you have certainty in your system, it means you trust your rules, your entries/exits and your have no doubt that you are doing the right thing. However, this can only be created through hard work in back testing, forward testing and coaching.

As you can see, if you don’t have that level of certainty in your trading plan, it means that you only have a vague idea of what you want from the market, which means you don’t have a winning trading plan yet.

More in Next Article

Thank you for reading. For Part 2 of this 2-part series article. Please click here.


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