3 Benefits of Forex Planning
October 28, 2021
Planning is the best resource a trader can use to navigate the pitfalls of the market. In fact, planning is the only way a trader can ensure success.
Planning allows you to solve some structural problems, some risks inherent in the practice of trading. The dynamics at play are not much different from those that characterize other areas of life, but in a market context, they become more predominant, more incisive.
What does planning mean in online trading? In a nutshell, it means developing a trading plan, or trading system if you will, and following it meticulously.
The trading plan can be considered as a set of instructions that suggest to the trader what to do, how to do it, and when, in every situation.
In short, it is an indispensable resource. It is therefore worth describing the main advantages of planning and the practice of speculative investing through a trading plan.
Planning against the unexpected
Planning allows the trader to better deal with the unexpected. These are the order of the day when practicing trading. Uncertainty dominates the markets, despite the practice of analysis (technical and fundamental), which offers certainly useful estimates but of a purely probabilistic nature.
Why does planning, or rather acting through a trading plan, allow you to better deal with the unexpected? The answer is almost obvious: the trading plan, if done well, contemplates a wide range of events, and among these often figure the unforeseen events that can occur during the practice of trading.
Those who operate without a plan, therefore in the absence of planning, must face the unexpected almost blindly, in the best case making decisions based on experience but too quickly to be effective, in the worst case improvising and thus enormously increasing the probability of coming out the loser in the contest.
The plan, on the other hand, offers more or less precise indications for dealing with everything that happens in the market, even the unexpected (if well developed).
Planning against psychological pressure
Planning is also a resource against the psychological pressures that trading activity produces. Pressures are inevitable as the stakes are always high: money. All traders, experienced and less experienced, have to deal with their own psychological sphere. It is an unequal struggle, as managing one's emotions, i.e. limiting their impact on decision-making skills, is difficult in ordinary life, let alone in a complex and risky activity like trading.
The lifeline is given precisely by the act of planning, hence the trading plan. Those who operate with a trading plan shift much of the decision-making to a time prior to trading, to a time prior to the peak of psychological pressure. They do not ignore emotions, they do not suppress them (not entirely at least) but they make them harmless.
It is a matter of limiting the damage, it is true, but it is still a goal that is difficult if not impossible to achieve in the total absence of planning.
It is worth noting a curious psychological effect. Those who have a plan on their side feel "prepared", so they tend to feel less stress.
Planning against the risk of loss
Planning generates even more concrete and tangible impacts. It literally saves money. The reference is to the discipline of money management, which essentially lives on planning. For all intents and purposes, it can and must be integrated into the trading plan. Risk management, another fundamental discipline, joins it.
The purpose of risk management is to plan actions so as to minimize risk. The purpose of money management, on the other hand, is to always and in any case include losses and gains within a pre-established range.
Together, they make trading activity less uncertain. Above all, they ensure that losses become part of the game again, and not an uncontrollable misfortune.
Those who plan and develop a trading plan can therefore take full advantage of the possibilities of money and risk management, putting in place greater protection for their capital.
