Excellent traders always act according to a plan and rarely make 'on-the-spot' decisions or improvisations. They will formulate detailed entry plans, position plans, take-profit plans, and stop-loss plans, forming a complete trading system, and during the trading process, they strictly follow the established plans to execute trading operations—on this point, manual trading and quantitative trading share the same principles. To become a winner in the market, a complete trading plan is indispensable.
So why is a trading plan so important?—The market is like a battlefield, and when truly facing the rain of bullets, most people (traders) find it very difficult to maintain rational thinking. In the face of a series of unexpected situations, they can easily become flustered and at a loss, falling into the psychological traps set by the market. This is also the main reason for the daily losses of most retail traders. To improve the win rate of trading, we must make trading behavior as rational and reasonable as possible, and the best way to achieve rational trading is to plan trading behavior in advance—What should I do if the market slowly retraces? What should I do if the market rises sharply? What should I do if news data is released? What should I do if I encounter resistance? And so on. Rather than waiting until something happens to slowly think about what to do. Firstly, we do not have enough time to think deeply, and secondly, we can easily be influenced by our mindset, and various factors will reduce our trading win rate.
A seasoned soldier will outline various marching routes in their mind before going to battle to respond to various wartime situations, and so do mature traders.