Beginner forex traders are typically advised to create and stick to a trading plan that is designed to meet their trading goals. However, one of the biggest challenges facing new forex traders is their inability to stick to a plan. This issue not only affects newbie traders, but is also a defining character trait of many losing forex traders. In this article, we cover some of the most common reasons why traders struggle to stick to their trading plans.
Most traders who do not stick to their trading plans are driven by the fear of their trades not going according to plan. Faced with such a scenario, most inexperienced traders panic and take actions that are not in line with their trading plan.
In order to avoid making trading decisions driven by panic, you should always plan for all possible outcomes before initiating a trade. Statistics prove that most trades do not go according to plan, and having a full understanding of how your trade might unfold can help you adequately prepare for any potential shocks. This includes making sure that your take profit and stop loss orders are set appropriately.
Another reason why traders might not stick to their trading plan is when they have a string of either profitable or losing trades. For example, most inexperienced traders would become overconfident after a string of winning trades, which could lead them to discard their current trading plan in favor of taking higher risk trades.
The opposite is true for traders who experience a string of losing trades, a situation which might lead them to start doubting the effectiveness of their trading plan. This could lead to them abandoning a well-designed trading plan and start making trades with higher risk profiles.
In some cases, a trader might find it difficult to follow their trading plan due to a mismatch between their trading personality and their trading plan. For example, a trader might have many commitments that do not allow them to spend the entire day trading, yet they might be following a day trading system. There is a high likelihood that this trader will not follow his chosen trading plan due to time constraints, and would perhaps have been better served using a swing trading system.
In another example, a trader might be following a reversion to the mean strategy, yet his trading personality would be better suited to following trends. In this instance, the trader would be better suited switching to a strategy focused on keeping track of market trends.
As a trader, you must fully believe in your trading system so that when your trades do not go as planned, you do not start distrusting your strategy. In many cases a trader will start out following their chosen trading system, but as they experience losing trades they let their emotions take over, leading them to deviate from their initial trading plan.
It is easy for most traders to understand the concepts and principles that they should use in order to initiate winning trades. It is one thing to be familiar with the principles however, but an entirely different matter to apply the same principles in your actual trading.
Not sticking to your trading plan is a major reason why traders often encounter significant losses. Therefore it is essential to stay disciplined and stick to your well-thought-out trading plan through all the ups and downs of the market, in order to increase your chances of success.
Exness Limited is an international, award-winning retail forex broker founded in 2008. With a deep understanding of traders’ needs, the forex company provides accessible, stable, and reliable brokerage services through the use of modern trading and investment technologies.