Most of the traders i have interacted major flaw in most of their trading is not being planned and prepared. Most of traders are predictive in nature, they are more interested in knowing the next move of markets. Technically speaking a traders should be reactive in nature where they trade what market is showing on screen not assuming what can happen.
The Reactive nature comes to trader when they are prepared and planned for the trading day.
Spend few minutes before reading further and ask yourself
What do you do to prepare before you trade?
Top sports people and teams, businesses, and top traders wanting to perform well with consistency have long recognized the importance of meticulous preparation. This high level of preparation pre-performance enables them to execute to the highest level possible.
Let me discuss the Benefits of Trading Plan
Repeating the same process each time before you trade is consistency of behavior, and performance is ultimately an aggregate of behavior. Getting into the habit of preparing each time you trade gives you the opportunity to establish consistency.
Knowing that you have prepared can give you a real confidence boost – and knowing that you have not prepared or have under prepared can certainly give you an uneasy feeling! Think of time when you have planned your trades properly and executed them flawlessly, ON such trades even loss does not hurt as we know we gave our best. If you want to be the BEST you need to prepare each and every aspect of your trading and go in market with full confidence.
Preparation is a part of the trading day over which you have full control. Having Full control on your trade means you are not affected by market noises and trading without emotions. A sure shot way to profitability.
If you have prepared fully and considered some ‘what if?’ scenarios, then one big edge is that your level of preparedness will enable you to act quickly and calmly should those events occur. From my personal experience if you are composed at critical moments you can make very good money.
Last 2 Budget days as soon as FM finished speech there is big spike in market, only few traders out were able to react quickly and decisively enough to get in early on the market move. Those traders made large sums of money that day due to the fact that they had been prepared for such an event, and had considered what they would do in such a situation. Of the other traders, most made little money and were left just watching the markets move.
Your preparation routine can become a trigger to activate a focused trading mindset. In sports, most players have a pre-performance routine – this is readily seen in golf, for example – and this routine enables them to switch their focus to the key performance factors and to get ready to engage in execution.
Going through your preparation routine also enables you to mentally shift from one mindset and state to another; e.g. from waking up to trading, or working to trading. It is important to make sure that when you are trading you are in trader mode.
Knowing what is coming out in the markets in terms of economic data, speakers, earnings releases, auctions, etc is very important because any of these can have an impact on the market, and often the result is increased volatility around these areas. Knowing what is coming out and when, and considering the effects on the market, can help you to adjust your strategy or approach accordingly, and can help to mitigate any potential risks.