Your Trade Plan Is the Law

Unless you’re brand new, you know that you should have a trade plan before you enter a trade.

That said, new traders often struggle to stick to the plan. It’s like they’re looking for an excuse to hold the stock. It’s time to lay down the law.

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The Big Picture

Following your trade plan is the law, okay? No ifs, ands, or buts about it.

Remember, your first job as a trader is risk management. Now, some people will disagree with that.

They’ll say, “I’m here to make money.”

Or, “My first job is due diligence.”

Those are indeed both part of trading…

But job #1 will always be to manage risk.

Now, you could get caught in a black swan event that is out of your control. And sometimes you’ll just be wrong. (It’s okay to be wrong, just don’t stay wrong.)

But for 99.9% of your trades, you are in control. Which means that if you follow our process…

You Control How Much You Lose

Here are two quotes every trader should know:

1. It’s not the money you make, it’s the money you keep. If you have 99 winners that are eclipsed by one loser, who cares? Your 99% win rate is meaningless.
2. One trade won’t make your career, but one can end it. Even if you’re trading with a big account, you’re not going to make any single trade where you can just retire, right? But the inverse is true. One trade can completely take you out of the game, okay?

So, you can never guarantee how much you make, but you can always control how much you lose.

How?

Create a Trade Plan and Follow the Plan

It really is that simple. And from now on, it’s the law.

Now, I know some will read this and try to come up with excuses of why they took a bigger loss than the plan called for…

• “But, Tim, what about slippage?”
• “What about that offering I didn’t see coming?”
• “What about the short sellers piling in?”

All of those things are part of trading. They happen. There’s an acceptable margin of error built in.

That said, not getting out when the trade hits your stop is unacceptable.

The same goes for targets, okay?

That’s why we have profit targets. That’s why we manage trades. It’s why I teach beginners to exit at 1-to-1, 2-to-1, or at most, 3-to-1 reward-to-risk.

No matter what your trade plan, once you set it in motion, it is codified law. If you break the law, you’re asking for trouble, okay?

My Take

My mentor Tim Sykes is one of the most intuitive traders I know. But even he puts himself into “trading time out” when he gets undisciplined.

For me, I prefer to have a clear trade plan which includes:

• A defined entry
• A clear risk zone
• A target.

If you decide you want to alter a plan, wait until the next time you trade that pattern. Know ahead of time what you’re going to test, and use the trade to collect data. That’s the only valid method for changing your plan.

Remember: once you’re in, you own the stock. Following your trade plan is the law.

Watchlist

SCWorx Corp. (NASDAQ: WORX) spiked Monday (Oct. 19) on contract news, and held up well on day two:

Based on how well it held up, WORX was my Daily Double Down pick yesterday:

A double tap of the Oracle signal at $4.21 would be a squeeze point. So, WORX is a confluence idea. If it breaks above the signal, the risk zone is $3.95. (or $4 if you want to tighten the risk.) Target a test of major resistance near $5.

On My Radar

• Tesla (NASDAQ: TSLA) reports earnings after the bell today
• Meta Platforms (NASDAQ: META) is the other Mag 7 to report in the midst of a so-called “AI confidence crisis”
• When everyone was screaming “SaaSpocalypse” in January, Salesforce (NYSE: CRM) proved them wrong by showing how AI agents could make enterprise software more valuable. Yesterday, it announced a deal to acquire customer engagement platform Braze (NASDAQ: BRZE) for $5.66B
• Make this trade at 9:30 a.m. on Monday for a chance to see 149% gains