I was watching an old movie "Coach Carter," starring Samuel L. Jackson. I couldn't help thinking about the many similarities between what a coach must do to prepare his players and what a trader must do to prepare to trade.
Since trading is largely a self-directed business venture, embarking on a trading career requires that you are able to set clearly defined objectives and develop a specific plan for achieving them.
Clearly defined objectives and well-developed plans carry the stamp of success in any professional undertaking.
Imagine an ocean liner departing without a navigational plan, a repairman doing repairs on your refrigerator without full knowledge of the workings of the compressor, or a professional basketball team running onto the court without a game plan.
In each case, the lack of a clearly defined plan in which specific objectives are set and specific steps are outlined can produce disastrous results. Clearly defined plans are essential. The captain sails his ship with plans for the safe and on-time arrival to a destination city. The repairman examines the inner workings of your refrigerator and uses the correct parts and tools to fix the problem. The coach tells the basketball team to run specific plays to defeat the opponent.
Successful trading careers start with plans that specify objectives, which in turn lead to success. There are psychological benefits to establishing objectives and developing plans to reach them. First, you may find your stress levels are reduced. Making a specific plan allows you to detail any vague and seemingly unattainable objectives into clearly defined steps, which in turn make the larger goal seem more reachable. When you have a specific plan, you can more easily identify which steps to do first, and then figure out how you will achieve each one. In addition, you will find that following a plan ensures you stay positive, so you control each aspect of your trading day (instead of its controlling you). This leads to increased confidence and consistency, which leads to increased effectiveness, which in turn leads to advancement towards your ultimate goal.
You must then write down the way you envision your goal. Create a definitive statement detailing as much of it as you can. Be very specific. Then read your objectives aloud every day. They must become believable.
Accordingly, you adjust trade size and protective stops so that you never lose more than your planned amount on any trade.
Now, map out your plan. What is your budget for hardware, software, and education? How much time can you devote? How much money will you use? What trading time frame, or style, matches your personality? For example, if you have trouble making split-second decisions, then scalping is not for you. Perhaps position trading, with a 2 to 5-day hold, better suits your personality.
Maybe you want to target certain markets and become a "specialist" in those markets. Or maybe you prefer to trade spreads or options. What set-ups do you prefer? Become an expert at trading a particular set-up and have it deliver the main part of your gains. Detail your trade, risk and money management strategies. Finally, establish a list of trading rules that you keep close-by.
Once you establish convincing and realistic objectives, and map out a plan that leads to those goals, you will find your trading efforts to be easier, more exciting, and certainly more successful!