SUBSCRIBE TO FEEDThere are many obstacles that prevent most traders that have an excellent trading plan from following it properly. Almost all of these factors are psychological.Review: Following the Plan
Let’s say you have made a detailed trading plan. You know the exact criteria or “rules” you will use to place a trade. You have a checklist to make sure you follow each of these rules. You have a money management strategy so you know how much you will risk on each trade, and you know what your risk:reward ratio must be. You know what time of day you will trade, what time frames you want to look at, and what currency pairs you want to look at. You have a spreadsheet ready to track each trade for further analysis.
The reality, is that this is the easy part. To give an analogy, there are many people who could learn an NFL offense. They could watch film, go to meetings, and learn which route each receiver will be running on each play. However, there are only a handful of people in the world who can execute these plays with a blitzing linebacker bearing down on them in a game situation. In other words, very few quarterbacks have the ability to execute.
Of course, the gap between learning plays and playing quarterback in the NFL is much larger than the gap between making a trading plan and following it. But the point remains that if we can’t execute the plan, then it doesn’t matter how great the plan is. It may seem easy to follow a trading plan, specifically if it incorporates all of the points I listed in the first paragraph. For those of you who have traded with real money, you know that this is not the case.
