The Successful Trader's Guide to Money Management

CHAPTER 7The Work Plan

7.1 Using a Work Plan

It's a good idea to use a strategy with a clear idea of the field you're going to use it in. If you simply start using a strategy without a clear idea of how you're going to use it, this can often put you in situations where you don't know what to do. As long as you're making a healthy profit everything is fine, but as soon as you suffer a period of drawdowns you'll begin to worry. At other times, if you know the rules of the strategy (perhaps one you created yourself), you can try to change it to improve things in the unfavourable period you're in. A good trader stands out from the crowd also in these cases due to his abilities, and one of the essential qualities of a good trader is knowing how to react to losses.

If the trader did a preliminary study of the strategy (and therefore planned potential goals but also, and above all, planned for potential hazards) he'd be able to assess difficult periods more calmly, knowing whether they were part of the game or whether he should be worried if something is effectively going wrong.

Planning is often a job that's given very little consideration or is done superficially, perhaps because people just want to get started as soon as possible, or because they think it's boring and won't be a great help anyway. But, when you find yourself in difficulty (and inevitably sooner or later everyone does), if you know how to react, all the work you've done, and the time you've put into planning up ...