Sticking with the Strategy

The trading plan forms an essential part of any wider trading strategy. Outlining the modes of trading and the targets, styles and strategies you’re adopting, a trading plan and its contents are an invaluable aid to your ongoing trading success and development. A plan can reduce discretionary decision making, which in turn slims down the number and degree of potential errors, and can help in the decision making process when you’re faced with difficult trading choices. However, one of the more common pitfalls amongst traders is implementing and sticking rigidly to the strategy they have adopted, which isn’t always advisable or beneficial to long-term trading success.

Where market dynamics change in a split second and can turn unexpectedly and wildly in varying directions there is at times the need for a less intense approach that allows sufficient flexibility to react to market changes.

Riding The Markets

Markets are driven by supply and demand, and are pushed and pulled in different price directions as a consequence. The role of leverage across the markets serves to artificially amplify these swings, and the range of price movement can be quite severe as a result. As a trader, even with deep pockets you need to make sure you’re not on the losing side of a price correction, or an emerging market trend that will eat into your capital without a second’s hesitation. While having a strategy that you consistently follow is admirable and valuable in some respects, it’s totally unsuitable in some scenarios and can actually hinder, rather than aid, your performance.

The trick is to maintain sufficient consistency in normal trading circumstances to grind out an aggregate profit, while remaining dynamic enough to respond to the changing market climate – whatever happens. While this is easier said than done and requires skill and judgement in identifying when to stick to the plan and when to divert from the course, knowing how and when to ride the markets freestyle can be of a significant advantage to your trading position.

Dynamism

Dynamism in trading is something of a double-edged sword. In some respects being too dynamic and fluid in your trading decision making is a recipe for potential disaster and trading inconsistencies, and these can be a destructive force on your capital, not to mention morale. At the same time, sticking to the plan often isn’t the answer, and so traders can feel left in a catch-22 position. While it shouldn’t be considered an absolute, having a dynamic and flexible approach as a ‘common sense filter’, in conjunction with your strategy and backend plan can often be the best approach to trading successfully and profitably.

Sticking to your strategy and deploying your trading tactics exactly and rigidly as planned isn’t necessarily a bad thing, but it is important that you are prepared to respond and act on different, more responsive strategies as the markets develop. In order to maximise your trading efficiency and your returns, keeping a flexible eye on the markets will pay dividends in maximising your earnings and minimising your losses from stubbornly held positions.

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