Execute Your Trading Plan Or Fail

If you are unable to execute your trading plan in a consistent manner, your other trading skills are meaningless.

Expert at technical analysis and reading price movement?

You can see where the buyer/seller imbalance lies and can exploit it.

Can you instantly see where your trading plan setups are occurring?

All those skills are meaningless if you are unable to execute your plan.  You are leaving money on the table and no doubt getting worse entries than you would if skillfully executing the plan.


Two Types Of Executions

If a boxer has a mean right cross but never throws it, fails to execute that punch when the situation is right, their success will be limited.  They could even be knocked out for missing the opportunity to lay out their opponent.  Traders who have the skill to profitably trade, are no different.

There are two types of execution you as a trader should be familiar with:

+ The mechanics of execution

+ The emotions of execution

Understanding both of these are vital in the day to day operations of your trading business.  Without these, your chance of ongoing success if limited at best.

Mechanics of Execution

This is having the ability to execute the plan and get into the trade.  Simple, right?  Push a few buttons and make profits.

Not quite.

These three questions are vital in the moment of truth:

+ What type of trading orders do you use with your strategy?

+ How do these orders work with the market you are using?  Will there be slippage with entry and exits?

+ Do you use a pending orders to take profits?

How your orders get to market is another issue that is sometimes out of our control.  Although it is the other aspect to the mechanical side of execution, it is no less important.

+ The speed of the trading network

+ The speed of your connection to the network

+ The physical distance you are from the exchange

Those three issues can have a potentially large impact on your ability to execute your trading system.  For scalpers, your success or failure depends on the infrastructure you use to trade.

What about the program used to enter the trade and your skill in using it?

For example, if you require the ability to adjust orders quickly, switch order types, move your stops, are you able to do that with ease? Not all trading platforms are the same and much like a cook using a dull knife to whip up a special dish, your choice of tools matter.  I have found there are some entry systems that are too difficult to maneuver and was frustrating navigating around them.

Ever had “fat finger” errors?  This is where you inadvertently input the wrong information?  We’ve seen it in the markets are on a large scale.  Here are a few examples:

Japan stocks rattled by $617bn ‘fat finger’ trading error | A Brief History of Some of the Market’s Worst Fat Fingers

Bottom line?  Know your tools and become an expert at using them with consistency and skill.  There can be no hesitation in entering the order once your trading plan has pinpointed your setup.


Emotions of Execution – The Deal Breaker

Assuming your trading strategy has an edge in the market, the biggest roadblock to consistent execution is mindset.  There are many out there who suggest mindset is the first building block of success, but I don’t agree.  You need a system that has an edge over time.  You could have the strongest successful mindset but if you continue to rack up losses and drain your account, your mindset will change.

When you are in the process of anything trade related, emotions can run wild and distract you from what is important at specific points in time.:

Observing the setup of price | Considering the entry of the position | Entering, holding and then exiting the trade

Keeping your emotions under control is vital.  Many of the most successful people in the world often use performance coaches.  As a trader, why should you go it alone?  Think of performance coaching as part of your training.  It doesn’t have to be trading related as many of the issues in sports, for example, crop up in trading as well.

Outcome Focus VS Process Focus

I call it that because we naturally lean towards thinking about the outcome of this specific trade and its importance.  Some traders, if not most, place vital importance on the outcome of a single trade.  Having this mindset can be gut-wrenching and can evoke amounts of rage when the “expectation” of a perfect trade, does not go according to plan.

Trading from a place of fear is not helpful.  You have done everything according to your tested trading plan in preparing for this moment – the moment of entering trade.  It is normal to want to be right and to win on this trade.

But trading is based on probabilities.

+ You will win

+ You will win multiple times in a row

+ You will lose

+ You will have a run of losing trades

+ There will be times you enter long at the high of the day

+ You will exit with a healthy profit only to see price continue in your direction

Every trade you take according to your plan is unique and you will never know where it falls on the distribution of wins and losses.  Your job as a trader is to assess the probabilities and accept the probabilities before you enter the next position.

The outcome does not matter on this trade.  What matters is the proper execution of your trading plan.  This is where your focus must always be.


Control The Controllables

Focus on the process of trading and not the results you are seeking.

Can you control if this trade will be a winner?

Can you control if your internet goes down upon order entry?

Can you control your exact stop loss exit price?

The answer is no.

I know, most people read posts and watch videos to find a great strategy, a secret indicator, the road to riches.  This is not the most sought after subject.  But, I promise you, knowing your mindset during your trading day, accepting what is out of our control, and being process oriented, is vital.

We test, prepare and the focus must be on the execution. Positive results in your trading are much easier to come by when in the moment of the trade, your focus is on execution.  Over time, the good plan you are trading will show its worth.