We talk a lot about the importance of trading plans, but it has occurred to me that plans may be where many of us are coming up short.

Merriam Webster defines a plan as a set of actions that have been thought of as a way to do or achieve something, or something that a person intends to do. It’s like a suggestion, but not set in stone. Maybe we should be thinking more in terms of Trading Laws, instead.

There are countries in which driving regulations are more of a suggestion (you know who you are). The laws aren’t enforced, and there are massive traffic jams, lots of honking, and most importantly, lots of anxiety. Getting successfully from A to B takes a lot of time, patience, and good fortune.

By contrast, the driving regulations in the United States are pretty well enforced. For example, we know that traffic signals are not optional. We may hurry through a yellow light, or even run a red light on a rare occasion, but we know that if we do it often enough we will eventually get a ticket, or worse. We obey traffic laws because we take them seriously; they are strictly enforced and there are consequences.

Why don’t new traders have the same level of respect, or fear, for our trading plans? If we treated our stops like a red light and didn’t allow emotions or ego to get involved, we would incur less risk and have more success. We should always practice defensive trading, giving our hard-earned capital and peace of mind the respect they deserve.

 

By holly