Market Psychology – Trade plan
By: Gaurav Taneja, Financial Trainer, Venteskraft May 16, 2020
I understand that you are a person who can remember things very easily for a long time. But I would still advice you to always make a trade plan or write what you already know on a paper and then start trading. I know it sounds a little too much and unnecessary but believe by the end of this blog you will be on the same page with me. This is the continuation of Market Psychology series, if you have missed the previous blogs start them from here.
In our daily lives, we are habitual of doing most of the things by the reflex, or in the spontaneity of the moment. For example, a person walking on a fixed path on a daily basis will not take a conscious decision before taking a turn. Or even if your eyes are closed you can write your own name on the paper. All this is because of the practice which had been done and is still being done without knowing. Without the proper experience and constant practice, novice traders, think they can reflexively make decisions during the trade. But a detailed trading plan is an important aspect for success.
When we first start trading, it is difficult to trade on the spontaneous moment. There are so many issues to deal with, and due to that, they are bound to make a mistake. If you make a specific set of actions or in other words a detailed trading plan, you will notice the benefits of it. Scientific research have pointed out how making an action plan helps achieve the goals.
For example, if you made a specific plan, that if Market Condition A happens, and a Technical Indicator B gives this indication, then you should enter at a proper moment. Set a protective stop loss, and monitor the Trade till C happens. Knowing all this beforehand, will help you to execute your trade more profitably and effortlessly. The exact plans helps to respond quickly and automatically when necessary.
Our brain is programmed in such a way that it cannot multi task. So if you do not make a trade plan and you see something happening in the market, your first reaction rather than analyzing the point, will be to remember what the strategy tells you or what the strategy actually was. That is the thing about our brain, it doesn’t know how to process large information together. So if you have a trade plan you can shift your attention towards the actual trade.
So in the beginning when I told that whatever you know, you should write it down on a paper, or make an action plan, I repeat the same thing here. Because next time when you sitting in front of the monitor, watching the movement of the stock, you should not worry about remembering and forgetting anything. You can smoothly finish the trade with profits.