Beginning forex traders are often advised to create and stick to a trading plan designed to achieve their trading goals. However, one of the biggest challenges new forex traders face is their inability to stick to a plan. This problem not only affects novice traders, but is a characteristic trait of many losing forex traders. In this article, we will cover some of the most common reasons why traders struggle to stick to their trading plans.
fear of the unknown
Most traders who do not follow a trading plan are concerned that their trades are not going according to plan. When faced with this situation, most inexperienced traders panic and take actions that are not in line with the trading plan.
To avoid making panic-induced trading decisions, you should always plan for all possible outcomes before you start trading. Statistics prove that most trades don't go according to plan, and having a good understanding of how your trade is likely to unfold can help you to be fully prepared for any potential shocks. This includes ensuring that your take profit and stop loss orders are set properly.
Solution: You should always set a stop loss level to prevent trades from going against you and you should trade according to a plan with a planned take profit level.
A Long-Term Victory
Another reason why traders may not follow a trading plan is that they have a series of profitable or losing trades. For example, most inexperienced traders become overconfident after a series of winning trades, which may lead them to abandon their current trading plan in favour of higher risk trades.
The opposite is true for traders who experience a series of losing trades, a situation that may cause them to begin to doubt the validity of their trading plan. This may lead them to abandon their carefully designed trading plans and start taking riskier trades.
Solution: Regardless of your recent success, you should not change your trading plan too quickly. You should understand that even the best trading plan can experience losses. Be patient and stick to your carefully designed trading plan.
Lack of compatibility with your trading plan
In some cases, traders may find it difficult to follow their trading plan due to a mismatch between trading personality and trading plan. For example, a trader may have many commitments that do not allow them to spend a full day trading, but they may follow a one day trading system. Due to time constraints, that trader will most likely not follow his chosen trading plan and may be better served by using a trading trading system.
In another example, the trader may follow the regression of the average strategy, but his trading personality is better suited to follow trends. In this case, the trader would be better suited to move to a strategy that focuses on following market trends.
Solution: Analyse your trading personality before you start trading and before choosing a trading plan that is consistent with your strengths.
Lack of conviction in the trading plan
As a trader, you must have complete trust in your trading system so that you don't begin to distrust your strategy when your trades don't go as planned. In many cases, traders will start after their chosen trading system, but when they experience losing trades, they let their emotions take over, causing them to deviate from their initial trading plan.
Most traders easily understand the concepts and principles they should use to initiate winning trades. However, it's one thing to be familiar with these principles, but it's quite different to apply the same principles in actual trading.
Solution: Make sure you test your forex trading plan thoroughly to build your trust in the system. By testing your trading plan on a few demo trades, you will learn to trust your trading plan even if you experience a losing streak.