How a Trading Plan Can Make You Prosper

Posted by writer on November 29th, 2009 at 10:17am

Stuart McPhee discusses about the trading plan and support and resistance with the Money Show.

Stuart:’We start out we make a lot of intuitive decisions, we lose a lot of money and then somewhere along the journey we work out, I think I need to go back and start from the basics again. Maybe this trading plan is a little bit more serious and a little bit more vital to our success. We don’t do that at the beginning we think we will be ok we make decisions every day of our life. We rely on instincts and intuition, but at some point we need to have a plan to protect capital.’

Tom: ‘And I think some people get successful when they have a plan and then they revert, they stop having a plan. Do you see that too?’

Stuart: ‘Yes you do. Every now and again you do. It’s that confidence and confidence is so vital in a trader but overconfidence is not. And the plan will stand you in good stead for many, many years. The plan evolves, it changes, markets change. We adapt we are very flexible human beings. Yes we have to evolve that plan. But the over confidence, I’ll be OK, I don’t need a plan I think we’ve seen throughout history a number of well-known people have moved beyond a trading plan have blown everything and wondered why. I’m just a big advocate of having a plan and sticking to it.

Tom: ‘You teach people a lot about having a trading plan and one of the most important ingredients you feel is the psychology of trading, which most novice traders don’t even consider starting out.’

Stuart: ‘Absolutely not. I couldn’t agree more. The last thing we consider when we start trading is how our mind will play a role in our trading success. I think only by trading and making some mistakes and losing money do we fully appreciate how our mind plays such a vital part in our success. And I think it boils down to one thing. The majority of trading decisions, if not all the trading decisions we make are counter intuitive.

Well this is a real challenge to us because all through our life in fact throughout the history of man we’ve relied so much on our instincts and in fact humans have evolved over the years through our instincts. So we very much rely on our instincts through everything we do every day. Trading you cannot do that. Everything we do is against our instincts, is counter intuitive, so clearly that leads us to discipline and doing what we have to do rather than what we want to do is probably one of the most important attributes successful traders have. Discipline and having a suitable trading plan are key ingredients for any trader to attain trading profit.’

Tags: protect capital, support and resistance, trading profit

Under Day Trading