Trading is like a bus journey

Yes, a bus has crashed!! – the crash test driver unfortunately crashed into a forest. Don’t worry no one was hurt! 😉

Let me tell a bit of a story. I hope it resonates with some.

I have been trading over 5 years and I have observed many people failing including myself.

A big reason people fail is the lack of a plan and a journal.

We need a plan to follow to ensure we know what to do.

We need a journal to illustrate whether we executed the plan correctly. Now this may sound easy, and it is not. We, as human beings, do not like to follow rules. Can everyone relate to driving over the speed limit? Have you ever driven over the speed limit? We think we know better even though we know the speed limit is there so if we do hit someone the likelihood, they have a serious injury is less if we keep under the speed limit. This also relates to us. If we keep to the speed limit, we are likely to be less injured in a crash.

I have, over the years seen many training groups and organisations, and one of the items which is glossed over, in my opinion, is the insufficient detail on how to journal.

“It’s just an excel spreadsheet”, I hear you say, to record what you have done right? No its not.

You have rules to a trade, and you need to know whether you traded according to the plan, I hear you say, “A checklist, ah yes I know this”. How many people fill out a checklist before they take the trade? I am sure that the number that really do this is very small.

So, we have 90% of people failing (this is a statistic we all know I hope) few people keeping to the rules, and hardly anyone making a journal correctly that records whether the rules of said trade have been met. Can you relate with this? Also, a journal should record how we felt at the time of taking the trade, and what happened as it developed, so we can see perhaps what psychological barriers we have.

Let me give you an idea. What if you had a journal that details the rules for each trade, and for each trade you had a built-in checklist to encourage you to follow those rules? Do you think this would keep you on track to follow the rules? No - you still will not follow the rules. After reinforcement and practice, the chances you will follow the rules increase. This is what it is about. Reinforcement and practice. A successful trade set of 25 trades of you following the rules, will do wonders to your performance.

Where does the crashed bus come into this story? We are going to bake a cake first before the bus!! Everyone loves cake! :-) .

Now, another problem which repeats again and again, is if I say here is a cake - people go I want to make a different cake. Why is this? I have given you a specific cake to make and you want to make a different one. Now, what I would ask you, is, do you know what the success rate of you baking your own cake is? You know that - ok, go for it and good luck. Just write down the recipe and follow the rules of making it.

Think of this another way, here is the bus. I know you are dying to know where the bus comes into the story.....

"You are standing at a bus stop and waiting for a bus which has your name written in big letters on the side. A bus comes along, it doesn't have your name on it, and you decide to get on, always optimistic, it might just go the right way. The bus does not go where you want it to, and everything goes wrong. You get lost in the forest and the bus crashes, bad crash test driver!!!.

Now, the person that waited for the bus with their name on it, when they step on the bus they find a chest with money inside, wow, that is why the bus had their name on it.

Now, you are on the bus, when do you get off? As the bus bounces down the road, the chest starts filling up with more money. You need a plan to stay on the bus and you need a plan to get off the bus - you take the money with you, I would hope!! ;-)

In terms of trading, do you exit your trades too early and then watch the trade keep going for lots of percent and think only if? There are multiple ways that can be used to trail. Develop rules for trailing and follow them. You get off the bus when your rules are met to get off. If you have no rules, you are likely to let profits disappear, get off to early, get stopped out for a loss.

Do you get worried of missing out? The good news about busses(trades) there will be another one along shortly. There is always another bus with your name on it.

Do these concepts relate to you and your trading? Impatience, not following the plan, think you know better than the back-tested results?

If so, you know what to do. Journal each trade with a checklist to encourage you to follow the rules for entry, trailing and exit and you will see your performance increase. It will take time and practice. Having rules will make you less emotional to react in an adverse way and more accepting of a mindset “this is what I do!”.

If you see your entry requirements are satisfied, jump on the bus. Trail according to your rules, to a point, then get off and collect profits.

Have no deviation from your mission to get on the right bus and to get “home” in one piece.

I hope this analogy has been helpful for you.

Good luck with your trading!! All my best.