A Trading Plan only has value if it is utilized as intended. It does you no good to have one if you do not stick to it. We all know this, yet traders find reasons to deviate from their Plan, almost always with negative consequences. Why? There are several reasons.
- The Plan does not match the trader: A Trading Plan is a personal thing intended for a specific trader, based on her/his personality and circumstances. If it is not created honestly based on reality rather than hope, then it will not match the trader, and likely it will be neglected.
- Lack of Patience: Trading Plans are intended to be long-term, at least relatively so. Many traders give up on their Plan, or often more specifically the trading system in the Plan, after a period of sub-par performance rather than sticking it out through the inevitable rough times.
- Lack of Discipline: Trading according to a plan requires continuous performance of a set of actions in a proscribed manner. Doing so takes discipline. Traders lacking discipline do not stick to Trading Plans. (The word “discipline” is probably the most frequently used in regards to trading success.)
- Self-Destructive Behavior: Sometimes traders have deeply ingrained issues of a psychological nature which tend to sabotage them. It is something which can be overcome with work, but first it must be recognized and addressed.
These are not the only reasons traders fail to stick to Trading Plans, but they do represent a large portion of the explanations for it happening. The point is that a Trading Plan is little more than a document if not put in to practice.
I hope this sequence has been helpful to you. Definitely feel free to drop me a question or leave a comment with your thought, experience, or ideas on the subject.