Plan Your Trades, Trade Your Plans

All traders should have a trading plan. Those who do not are either new to trading, or extremely lucky (or rich) to have survived so long in the trading arena.

A trading plan simplifies one's trading decisions, since entries and exits would  have been thought out beforehand. I used to set a high target price at which to sell my stocks. If the price dropped, I would buy more. If the price dropped further, I bought even more. Thou shalt not sell, unless a profit thou made. In the stock market, whatever goes up must come down; and what goes down must come back up. Simple logic, isn't it? Not really. I was lucky not to have bought stocks in companies that went bankrupt.

Years later, I decided that I should not go against the market. Maybe I should just "ride the trend" - buy when the prices were rising and sell when they were declining. That went against the "buy low, sell high" strategy which I had faithfully followed since my first trade, but something about trend-following made sense to me. After some time, I got used to buying high in the hope of selling higher, though I was still unaccustomed to the idea of selling low in the hope of buying lower. Not until I learnt about something known as a "stop-loss".

Now I always trade with a stop-loss in mind. I still buy when the price goes up, and sell when the price goes down. Rather counter-intuitive, I guess, to the worshippers of the "buy low, sell high" mantra. I also invest with a longer term horizon of five to ten years. Yeah, I know. If I am an influencer for a trading platform, I would lose 99 percent of my followers, just by mentioning my investment horizon. I do, however, allocate a portion of my funds for shorter-term trading, usually with the help of 1-day timeframe charts. I no longer set a target price for selling, preferring instead to "let the profits run". I only sell when my stop-loss is triggered.

So how do you plan your trades for optimal outcomes? Only you will know. Every trader is unique - with different objectives, beliefs, experience, financial resources, and so on. My trading plan may not suit you; neither will yours suit me. My trading mindset changed with time. So will yours. If you are an experienced trader, you will know what I mean. If you are new to investing and currently trading without a plan, please create one for yourself. All traders should plan their trades before committing to a position, and trade their plans as their mindset changes.