Nearly all aspects of life from studying, playing sports, designing buildings, or running for politics, ... require a plan before proceeding. A civil engineer cannot proceed to excavate the foundation of a building without having a blueprint of the house; Before each match, the coach must draw up the strategy and convey it to the players. Investing in the stock market is the same, to be successful, each investor must create his own trading plan and act in accordance with discipline. Perfect plan - Shorten the success gap.
What is a trading plan?
A plan is a set of activities and tasks arranged in a certain sequence to achieve a set goal.
Planning is the first of the four functions of management, which includes planning, organizing, leading, and controlling.
A trading plan is basically a framework that guides investors through the entire trading process. A plan is not simply a few trading rules, it is a long-term roadmap that includes many factors including: Strategy, capital management, trading time budget, trading diary, trading psychology and many other factors.
The trading plan is the guide to help investors act more rationally, before the constant fluctuations of the market. Importantly, each investor should create their own trading plan to have a consistent action – in each case – where to buy, take profit or even stop loss. And of course, investors can build their trading plan based on the advice and support of your broker.
There is a familiar saying in the world of Traders: “Losing a trade is like losing a battle, but without a trading plan, you will lose a war.”
It is the steps in the plan that are each step to success in the stock market. Because, the trading plan will answer the question of what we should do when we don't know what to do. Why is that? -
Indeed, although the stock market has many participants, the psychology of the majority of investors (especially individual investors) is strangely similar. Each period gives investors a psychological state, and that has essentially remained unchanged since the stock market was established.
Benjamin Graham once said, "The market doesn't care about anyone, every day He sets a new price." He often made a bottom when the human psyche was most depressed and made a top when the witnesses were most excited.
At the moment of market reversals – bottoms or tops – even corrections or rallies – investors are often confused about their actions. At this point, should I "get in line"? Buy now or disburse proportionately? Does the market really create a peak for me to take profits? Latch ½ or latch all? Tens of thousands of questions how to ask confuse many investors, leading to irrational actions. At that time, it is the advantage of those who have a specific trading plan.
The sentiment is real in the market, over the past time, most investors have been worried about the resistance level of 1200 points, which is completely understandable - because this is a big psychological resistance. However, in the session on July 28, the general index Vnindex surpassed 1200 points completely convincingly, but many investors "waiting for over 1200" continued to wait "for another reason". Meanwhile, the strong rising wave of the stock market is still ahead. What's important right now is that we have a concrete plan - and act on it.
Others, investors holding stocks since the peak in April 2022 are still waiting, of course, have missed a lot of opportunities in the recent strong increase of nearly 20%. Remember, investing is like gardening, having to pull out all the weeds (sell the losing stock) and take care of the flowers (keep the profitable stock).
Is a trading plan really useful?
“Every minute you spend planning saves you ten minutes of execution; this gives you 1000% of the energy recovered!”.
The stock market is no exception, good traders will make decisions easily because they understand their trading rules and what they are trading is following a set plan. .
Former US Secretary of State Colin Powell said: “There is no secret to success, it is the secret of preparation, working hard, and learning from failure.”
Warren Buffett - the most successful investor in the world - always adheres to his trading plan to manage risk. To him, “Rule #1: “Never lose money”. Rule #2: "Never forget rule number one." The trading plan ensures accountability and keeps investors focused on their personal strategy.
When asked about the formula for making money in the stock market, Nathan Rothschild, an international banking magnate once said that there is definitely a trading rule, he never bottoms and runs in panic. , because always have to plan ahead.
“Take a trade only after the market action confirms your opinion and immediately enter” is the trading rule of “The Great Bear of Wall Street” - Jesse Livermore.
Create a plan for each trade you want to make, he advises. Once your trading plan is ready, don't rush into trading. Let the market confirm what we predicted and wait for the right moment to jump in. Patiently waiting for the opportunity, because after all, People are the driving force. Because human nature never changes, the stock market model will never change.
We find that successful traders in the stock market all have their own trading plans and are always disciplined in their actions. They don't let the opinions of others influence their judgment and reasoning. They have learned to believe in themselves and they only catch the fish they want to catch!
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Conclusion: Up to 95% of investors who participate in the stock market lose, so who are the remaining 5% – Planned traders. Book yourself a spot in the top 5% of stock market success with a trading plan and discipline! |
Although it takes time for the market to return to the 2021-2022 period in terms of new investors' interest, the number of new accounts opened has increased sharply compared to the beginning of 2023.
This is also not difficult to guess, because when the savings interest rate is low, the mature books are ready to be transferred to the investment account, especially when the profit in the market is very good.
In fact, if there is idle cash flow at the moment, saving is not an option for active individuals. The 12-month savings interest rate is currently only about 6.5-6.7%. At the same time, a statistic from the financial statements of the second quarter of 40 securities companies shows that the deposit balance of investors on accounts at securities companies increased by VND 8,200 billion, equivalent to an increase of 14% compared to the end of the first quarter of 2023.
Thus, it can be seen that the increase in liquidity in recent months comes from both increased loans and increased equity. In other words, the stock market actually received a new amount of capital along with the increase in purchasing power thanks to borrowed capital.
This is a trend that has been forecasted since the end of the first quarter, when the State Bank started the cycle of continuous interest rate cuts. Under the pressure to promote growth, the low interest rate level will certainly last longer, possibly even lower. If the crisis period of 2022 blows away the assets of many investors, newly opened accounts can be considered a "fresh" source of capital.
The stock market in the past has proven one thing, once money flows in, it is very difficult to flow out, unless the market enters a recession. Meanwhile, currently, the market has just bottomed (November 2022), so there is a high possibility that new capital inflows will continue to stay. The strong rally of the Vietnamese stock market is still ahead!
(Le Phuc)