One of the things we always talk about on our website is the importance of having a plan for all trading situations and sticking to it. Your plan should be something you are comfortable with and unique to your own style. Following someone, while it may be easier, is really not a recipe for long term success, and it doesn’t help you learn from your mistakes.
Think about it, if you buy a stock because you saw someone in chat recommend it but you don’t have a plan for trading it and you lose money, what is the trading mistake you can learn from? There isn’t one, the only mistake you could learn from was following in the first place. But if you come with your own plan for a trade you enter and you lose money, at least you can learn from your mistake. The other side of that equation is if the trade goes well…
You might think, “Gee, following that person worked, I’m going to do it again.” This is when you are on the verge of disaster. That type of mentality tricks you into thinking trading is really that easy and you don’t need to prepare and execute a trading plan. In the long run you will continue this strategy (as any habit you develop now is likely to stick with you), and you will get burned and you won’t be able to understand what you’re doing right (again, other than following someone in the first place).
We liken the point we’re trying to make to someone who copies off of his/her neighbor during a test in class. When you do that you are at the mercy of the knowledge of the person who you are copying off of. And no matter if you get a good grade from copying, or bad grade, you won’t actually learn anything. Furthermore, what is going to happen when the teacher separates everyone by extra space to prevent people from copying? You’ll be caught off guard, and will surely struggle.
Rather, it’s a lot easy to just take the time to study for yourself so that you’re prepared and you can learn from your mistakes. In trading, coming up with a unique plan of your own is a metaphor for preparing for a test and not having to copy off your fellow students. We felt that this email we received from one of our members spoke to this point beautifully so we’re sharing it with all of you:
I am Whazzzup85 on the board. I just wanted to send this to say thank you for
all the videos and the classroom sessions. I have learned so much in the past
two months when I first started looking into getting into the stock market and
came to the stockhaven website. At that time I knew nothing about the stock
market or how to trade. There are definitely some valuable lessons to be
learned. That said, I have noticed at lot of new people seem to just want to
follow what you do and not make their own plan. The following can be read to
the class if you so chose.
I got into TAT @ 1.26 on thursday using the swing trade strategy because I
noticed it broke above the previous days high. At the time when I alerted it
in chat, SH said some to the effect of good eye on catching that it broke
above the previous days high. The next day SH said something to the effect
that he noticed it went to the next resistance level and that he would have
taken profits. I did not take profits, and that day was a red down day. My
plan for this trade is to stay in the trade until it breaks below the previous
days low. I appreciate SH’s input, however when he said he would have taken
profits that was his plan, not mine. I will be sticking to my plan.
I made a plan for the trade, and I’m going to trade my plan. This is so
important to help YOU become a better trader and learn what works best for you
and not to just follow someone else. If you just follow what someone else is
doing you won’t learn how to become a better trader. I say this because it
seems that some people just want to follow whatever SH does.
I do understand that people want to know what he is doing in an effort to
learn, but some just want to follow and not put in the effort. If you put in
the effort I’m sure that it will be rewarding and more satisfying to know you
did it yourself. It makes you become self sufficient. If we all put in
the effort to become better traders, we will all benefit from it.
Thank you SH for providing all of the tools to help me become a better trader.”
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