Plan the Trade, Trade the Plan, or Else

Successful traders have rock solid discipline. They plan every one of their trades, then they simplytrade their plans.

It may be tempting to trade by the seat of your pants, but if you don’t develop clearly defined trading plans to follow, and follow them consistently, you’ll have difficulty making consistent money as a trader.

What’s wrong with deviating from your trading plan if you make a profit anyway?

Making an occasional winning trade, even when you threw your trading plan out the window, may provide short-term pleasure, but entering trades haphazardly can adversely influence your ability to maintain discipline in the long term.

When you stop following your trading plan, you become rewarded for a lack of discipline and you may start believing that abandoning a trading plan is no big deal. An unjustified reward may increase your tendency to abandon trading plans in the future. You may be prone to think “I was rewarded once; maybe I will be rewarded again. I’ll take a chance.” But the positive outcomes of undisciplined trading are usually short-lived, and a lack of discipline ultimately produces trading losses.

It’s useful to distinguish justified wins from unjustified wins.

A justified win is when you create a very detailed trading plan and FOLLOW the plan. A win that results from following a trading plan is justified and reinforces discipline.

An unjustified win occurs when you make a plan or drift from the plan. You might be rewarded, but the outcome occurred by chance. You might as well flip a coin or hang a printed copy of your charts on the wall and throw darts at it to help you make trading decisions. The win is unjustified and can reinforce undisciplined trading.

Maintaining discipline is vital for consistent and profitable trading. Trading is a matter of getting the law of averages to work in your favor. You trade proven trading strategies, over and over, so that across a series of trades, the strategies work enough to produce an overall profit. It’s like making shot after shot on the basketball court so as to accumulate a winning number of points. The more shots you take, the more likely you will amass points. Just look at Kobe Bryant or Allen Iverson.

But the winning player is the person who first develops the skill to make the shot consistently, so that at every possible opportunity, the ball is likely to go through the basket. This is why “spot-up” shooters like Peja Stojakovic or Dirk Nowitzski have higher field goal percentages than players who love to perform spectacular (but low percentage of making them) fade-away jumpers like Kpbe Bryant. They’ve developed the skill to learn how to shoot the ball consistently.

Consistency is crucial!

It’s the same for trading. One must trade consistently, following a specific trading plan on each and every single trade. If you trade one approach this time, and a different approach at another time, your performance will more than likely be haphazard.

I can’t stress this enough. You have to allow the law of averages to work in your favor, so that across the series of trades, you will make an overall profit. If you follow the plan sometimes and abandon it at other times, you throw off the probabilities, and you will end up losing overall.

With discipline comes profitability. Don’t let unjustified wins interfere with your ability to maintain discipline. Follow your trading plan, and cement in the mindset that if you follow your plan, you will end up more profitable in the long run.

  • Anaiya

    Great Advice. It is always good even for experienced traders to recap their strategies. Your commentary could not come at a better time in this volatile market.

    Thanks,

  • Anaiya

    Great Advice. It is always good even for experienced traders to recap their strategies. Your commentary could not come at a better time in this volatile market.

    Thanks,

  • rahiman

    Discipline create Right Habit, Habit create consistency…journey to success.

  • rahiman

    Discipline create Right Habit, Habit create consistency…journey to success.

  • tiptoncut

    exellent advice i will be (trying) to follow

  • tiptoncut

    exellent advice i will be (trying) to follow

  • Nickofdorset

    Thank you for this obvious, great, simple and true coaching – but oh so hard to follow! You have written exactly what I need to hear, thank you, your words are much appreciated.

  • Nickofdorset

    Thank you for this obvious, great, simple and true coaching – but oh so hard to follow! You have written exactly what I need to hear, thank you, your words are much appreciated.

  • ElliotOmoruyi

    Thank you babypips for the coaching. you have answers almost all the question I have in mind to ask consigning the forex market, although I am still fining it difficult to grab the step by step process I hope to get their someday once again thank you so much I do appreciate every words from this site and my regard to all member .

  • ElliotOmoruyi

    Thank you babypips for the coaching. you have answers almost all the question I have in mind to ask consigning the forex market, although I am still fining it difficult to grab the step by step process I hope to get their someday once again thank you so much I do appreciate every words from this site and my regard to all member .

  • trader88

    Advice that really be usefull.I will apply him.

    Happy Trading,

  • trader88

    Advice that really be usefull.I will apply him.

    Happy Trading,

  • azzure_zerk

    Much appreciated blogs.Nice advice.I will do your advice.This blog seems the blog that i am looking for.expecting for another nice blogs like this.Thanks a lot.

  • azzure_zerk

    Much appreciated blogs.Nice advice.I will do your advice.This blog seems the blog that i am looking for.expecting for another nice blogs like this.Thanks a lot.

  • vriesde1

    very good advice. I am having this problem right now, my systems have given me consistent profit, but last week I took a hit of 40% on my live account (my account is still small, as i believe it is not wise to trade large accounts when you havent been trading for a long time) deviating from my systems, thinking I could do it like those other times when I got rewarded for this lack of discipline, ive learned from this experience, never trade without a system.

  • vriesde1

    very good advice. I am having this problem right now, my systems have given me consistent profit, but last week I took a hit of 40% on my live account (my account is still small, as i believe it is not wise to trade large accounts when you havent been trading for a long time) deviating from my systems, thinking I could do it like those other times when I got rewarded for this lack of discipline, ive learned from this experience, never trade without a system.

  • shairee64

    my name is pete, i am new in forex trading ,6months old,i am intrested in someone who would manage my forex account and give me good profit returns , someone who has a good experience in the act of forex trading …kindly send me a mail ..shairee64@yahoo.com

  • shairee64

    my name is pete, i am new in forex trading ,6months old,i am intrested in someone who would manage my forex account and give me good profit returns , someone who has a good experience in the act of forex trading …kindly send me a mail ..shairee64@yahoo.com

  • WeNG

    rack up some profit for some times is not that hard, but the most hard to do in forex trading is to be discipline. Without discipline, you will be filled with emotion when market become volatile. So plan your trading system and start get consistent profit(with discipline) and success in your hand..

  • WeNG

    rack up some profit for some times is not that hard, but the most hard to do in forex trading is to be discipline. Without discipline, you will be filled with emotion when market become volatile. So plan your trading system and start get consistent profit(with discipline) and success in your hand..