There is an old adage that says "Any landing you can walk away from is a good one." In aviation and for that matter in Forex trading it is very true.
We can all picture the rookie pilot and his desire to succeed at flying. He studies hard and he gets to practice, practice, practice. He develops a preflight routine and gets it to the point that he never varies from it. He works through different scenarios, such as wind, rain, night time flying,landing, unique approaches, mechanical failures, the list goes on and on.
Yet, the day comes where all the practice and all of the study must now be put into use. Live flying and then his first solo flight.
What must happen for the pilot when at the controls with no one else to accept responsibility for his actions, no one else to 'bail' him out? Can you imagine that he would prepare less? Take additional risk, such as not doing his preflight routine? Or what about flying tired or maybe in a situation when the weather is poor or even bad?
It is laughable to even think that a pilot would take such risks. At that very moment his life depends on his executing a flawless take-off, flight, and landing.
And trading? Is it really so different? No trading is not a life and death experience, but our trading life very well could be in jeopardy if we fail to take the precautions needed to succeed.
How can we follow the example of the pilot? What steps can we implement to assure safe landings and return flights?
Lets look at each avenue of a pilots routine and see if we can make application to our trading experience.
1. Preflight Routine: Any experienced successful trader will tell you that their trading day would never start without some type of pretrading preparation for the day. They focus on the pairs they trade, what factors will effect it's movement. They are aware of what announcements may play a roll in the risk of their trades. Have you developed a preflight routine? Are you implementing a predetermined, repeatable set of actions that set your day into proper motion?
2. Stormy Weather: A skilled pilot knows his limitations. Ego must be checked at the door or a pilot could be risking his life and those of others. When weather is either in the forecast or comes up out of nowhere, a good pilot knows how to react. Sometimes that means not leaving the ground, and if in the air how to avert the danger and land safely. How do you respond when stormy weather hits your trading? What if you are in a trade and a spontaneous announcement hits, do you have your stop in place? How do you deal with a trade that has gone wrong? We all make poor calls from time to time, and more then a few pilots have found themselves in the face of bad weather after takeoff. Would the pilot who recognizes his limitations continue to fly straight into the storm? No. Nor should you if you see that a trade has gone bad, have a plan, an exit strategy to safely avert a disastrous outcome.
3. Safe Landings: It goes without saying a perfect flight can be ruined by a bad landing. In trading there are few things more disturbing then a executed trade that fails to provide the outcome we want. What can and does go wrong? Missed profits, stops too tight that take us out of a winning trade too early, risk levels too high. What can we do? Plan properly. A pilot may approach a runway and realize his approach is contrary to the wind direction for a good landing, he will adjust and attempt the landing again. What can we do to assure a safe landing? Risk is a great place to start. If our risk is at a proper level, then even if the trade fails, we are safe to fly again. However if we are loose, and over-leveraged we could die as a trader.
I truly believe that more great traders have been lost to poor planning and execution then anything the market can throw at you. How many were on the verge of becoming great, failed at one of the key areas and lost all their trading assets just a few days or weeks before putting it all together? Remember a traders life can be long and fruitful or short and wasted. Proper planing and execution can assure your place as a trader for the ages.
TraderCisco is a guest blogger, he can be followed on Twitter: @tradercisco and you can email him at tradercisco@gmail.com
