Sticking to Your Game Plan

Apurva Sheth
The past month has been turbulent for stock markets across the world. Volatility has shot through the roof. It doesn't matter if you're a bull or bear, such volatility can kill profits quickly. Your view on the market or stock may be right, but it may take a bit longer for the price action to confirm.

During these times, you might feel the urge to do something that wasn't part of your game plan-for example, holding on to a losing position after it hits your stop, exiting your positions out of panic, not entering a fresh position out of fear, etc.

A trader is most vulnerable of deviating from his game plan when profits are hard to come by and he's hit an emotional low.

But this is exactly when a trader has to trust the process and stick to the game plan.

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Trading is like a sport. In most sports, two teams compete against each other. In trading, the two teams are the bulls and the bears, the buyers and the sellers.

To succeed in any sport, it is imperative for a team to develop a game plan and then have the discipline to stick to it. They must execute the game plan even when things aren't going their way.

Same with trading.

A trader should have a trade plan-a set of written rules that he will follow in the trading arena. This means all his actions will be clearly defined in advance. A trader should ask the following questions and write down the answers for future reference.

  1. What markets to trade?
  2. What time frame to trade?
  3. What are the rules of entry in a trade?
  4. What are the rules of exit in a trade?
  5. What shall be the stop loss?
After considering these questions, a trader should write down the answers. This will be the basis of the trade plan. Devising the plan is the easy part.

The real test of any team, or trader, comes when the opponent is scoring and begins to leave you behind on the scorecard.

Do you veer from the game when that happens?

No. You stick to it. That's how teams become champions.

But unfortunately many traders miss out here. They fail to stick to their trade plan when things don't go their way.

And this is what separates successful traders from the not-so-successful traders. All traders go through bad phases, but a successful trader will have the discipline to stick to his trade plan.

Sticking to the trade plan does not mean you will never review it, but the decision to review and change the plan should be based on facts and made without emotion. It can be difficult to remain rational during turbulent times...when it seems the other team is winning. But that's why you have a game plan in the first place. Stick to it.

Do you think sticking to a game plan is important for a trader? Share your views in the Club or share your comments here.

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4 Responses to "Sticking to Your Game Plan"
Reetha
11 Sep, 2015
Definitely there should be a definite plan. Recently some of my picks fell far below and I was looking for an opportunity to reduce the loss. After some days the stocks came up reducing the losses partly. As I was very eager to reduce the loss I sold a portion of my holdings expecting the share to again fall below intra- day so that I can book some profit for reducing the losses. Surprisingly the stocks recovered smartly the same day , and I could have completely wiped off my losses had I stuck to the game plan . Today the same thing happened again. I was holding few Amtek Auto stocks . Recently the stock fell sharply and I reduced the loss by averaging. Today the stock has gone up nearly 75% intra day. When the prices reached the first ceiling a new ceiling is set each time and the stock went up by nearly 75%. Can you please explain the method of setting floor and ceiling for stock like the one mentioned above? What kind of strategy/game plan can we apply in such conditions?Like 
Digambar Kulkarni
10 Sep, 2015
It is a good idea to sick to own Game Plan. But every plan is to achieve an Objective. Plan comes out fro the Objective. Objective is even more important than Plan. Consider Armed Forces. It was believed that Himalaya is an impregnable wall between India and China. But in 1962 China attacked India across the Hiimalayas! Indian Armed Forces then got better organized based on Mountain Divisions, Even Artillery was Mule packed and the Game plan had to change keeping the same Objective to Defeat the Enemy.. When the markets are extremely volatile the Game Plan should be made accordingly .Like 
Tilak Keshvani
10 Sep, 2015
There should be objective behind any activity . There should be rules & regulations to achieve the objective ...and there should be " No Deviation" from these defined Rules & Regulations ! Tempting factors will come on your way like Market Crash , your emotions , your urgent liquidity requirements , your silly love to have some sizeable amount in Bank's Current or Saving Accounts ...! But , if u r strict & rational , reasonable thinker , u r going to win . Here , practice of performing & sticking to Rules & Regulations of defined objective plays a great role .Like (2)
harsh jhunjhunwala
09 Sep, 2015
most of your recommendations are hitting stop loss why is this what kind of analysis you are doing?Like (1)
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