In today’s episode, we are going to be identifying some of the reasons why traders have difficulty following their trading plans and offering some tips on how you can effectively follow your plan.
Trading is the hardest easy money you can make and when done right you will be doing a lot of things that are unnatural to you which is one of the reasons that make following your trading plan so difficult!
Before we provide some effective ways to actually follow your plan, let’s first peel back the curtain on why we as humans tend to make plans but fail to follow through:
- Humans are procrastinators by nature – our brains prefer instant rewards to long term payoffs.
- The Akrasia Effect – a Latin term coined by Socrates and Aristotle- describes the human tendency of acting against your better judgment.
- It’s when you do one thing even though you know you should do something else – similar to how you know you shouldn’t take that trade because it doesn’t fit your plan but you still do it anyways! If you cannot tolerate boredom, then you might take boredom trade instead of following your plan to satisfy that short-term need to trade.
- When you are planning you are doing so in your future self – however, when it comes time to make a decision, you are now in the moment and the brain is thinking about present self not future self and the present self really likes instant gratification, so it will intervene the long-term payoff for the instant fix!
- Sometimes when we make plans or even take a step toward achieving them, the anxiety that drove you to create the plan in the first place gets greatly decreased – research shows that planning our goals is almost like actually achieving them- if the subconscious considers the source of anxiety as handled you may lose focus of the real reason for the plan.
- When you fail to follow through on your plan, the subconscious mind knows the real reason you made those plans and that they are not a good enough reason to actually do the work required to follow through and execute on the plan.
- You don’t follow through on plans because you don’t know how you work best if you’ve been trying to make what other people do fit you.
- During the planning process, things are static and there is much less stress when info is known and unchanging, whereas when it is time to act in the present moment, you are working with variables that might not be known to you at the time which can cause more stress and anxiety as you look to execute.
Now that you are more familiar with some of the reasons that we as humans have difficulty following through on plans, let’s focus our attention on the most effective ways to actually follow through and execute your plan:
Build a plan that you TRUST fully
- Markets don’t follow any rules; when we don’t have rules we go by instinct and instincts don’t do well for us in trading!
- Following rules can be extremely difficult to do consistently when there is real money on the line.
- The biggest challenge for new traders is to build a plan that accounts for ALL possible scenarios that can occur during a single session
- Having a plan doesn’t mean that you will trust it – how can you trust it? Follow it for at least 90 days and see if it produces positive result
Find an Accountability Partner
- This is one of the biggest reasons we recommend joining a trading community !
- Most people will do whatever it takes to avoid being embarrassed or look like a fool to others; social pressure is a strong force we deal with as humans.
- Share your plan with an accountability partner or a friend/family member that will keep you accountable if you do not follow your own plan.
Lifestyle Choices + Diet
- How you do one thing is how you do all things!
- You need to get into the “trader’s mindset” when trading by eliminating distractions so that you can stay focused!
- Determine what your active “working hours” will be and make it a priority to limit distractions during that time
- The food you eat and drink should not make you tired and should make you more alert; eat whole foods and hydrate with lots of water.
Encourage Yourself with Positive Self-Talk
- The way you speak to yourself is going to determine how well you follow your plan or not!
- It takes discipline to do this; pay attention to how you speak to yourself and focus on encouraging yourself to follow the plan and be supportive of yourself if you make a mistake .. you are human after all!
- Make sure to check out Episode 39 on the topic of Eliminating Negative Self-Talk to Improve Your Trading
Identify the Specific Short-Term Needs that Overshadow your Trading Rules & Brainstorm Constructive Ways of Addressing These Needs
- If you tend to overtrade when the market is slower, then you desire stimulation and by creating stimulating activities during the trading day you can avoid unwanted market activity.
- If you wait for absolute perfection in setups before acting then your short-term needs are that of safety and security and you will not execute unless you “believe” in what your are doing.
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- Connect with our community online: Trade Pro Academy
- Catch up with our earlier episodes: Mind Over Markets Podcast