Peak Performance–Trading The Plan

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**This is the fourth in a series of posts from Bruce Bower related to “Peak Performance” the topic of his new book that SMB U will be releasing April 20th**

Trading the Plan

By Bruce Bower

“Everyone has a plan until they get punched in the face” – Mike Tyson

It is all well and good to have a plan. The next crucial task is to stick to the plan that you created. In fact, you should reframe your goal away from “making money, no matter how” to “crafting a good plan and sticking to it, no matter what”. This is related to my favorite concept, which is that investing well is mostly about making good risk/reward decisions and not just about making money.

It may not seem obvious, but there are many reasons why you should adhere to a plan that you drew up some time ago. First of all, you were likely much calmer and less emotionally engaged. When you were drawing up your strategy, you probably settled on a plan after much deliberation and research. Moreover, you didn’t have any positions on, or at least you didn’t have your current positions on, so you were less emotionally engaged. Lastly, you usually can make plans when the markets aren’t open, so your stress and activity levels may be lower. These are ideal conditions for making decisions, and you want to base your actions on the decisions made in this state. This will be your wellspring of strength and stability when everything else gets difficult and crazy. Instead of losing your cool, you can just refer back to your ready-made plan and do it.

Implementing your plan successfully is the most important thing you can do. Assuming that you have a half-decent plan which is consistent with all of the BTTs for a strong methodology, then you will become successful if you can carry it out flawlessly. This is what we call discipline.

A large part of this will consist of monitoring how a positon does versus your plan and having some contingencies in place. The most obvious is a stop-loss: if it moves against you a certain amount, then you are out. This is a blunt but effective way to minimize your losses. A second tool is the take profit: if a position goes a certain amount in my favor, then I will take it off. Ideally, your take profit objective is wider than your stop loss, because you want to have positive statistical expectation on every position.

Now it gets a bit more complicated. A third tool is having a plan for various different things that can happen with a position. What happens if it just sits there for three months—do you keep it or get rid of it? What happens if the price is performing but your whole thesis for getting in is crumbing? You need to have answers, in advance. That will help you keep a level head and to make the best decision possible.

The last thing to keep in mind is risk management of your entire portfolio or account. One individual position may be okay but you have to cut back on risk overall, then it will get as well. You could also realize that you have too much exposure to one factor, e.g. the price of oil or interest rates , and you want to hedge that risk or reduce it. These are valid reasons to change exposure in one individual name and in your overall exposures. As always, it should come from your plan—you should have contingencies in place at the level of a portfolio and individual positions.


“The unexamined life is not worth living”- Socrates  

Elite performers everywhere are constantly reviewing their performance and coming up with various tweaks to apply, in order to get better. Success is an iterative process. The goal here is to continually work at smoothing out your rough edges.

The first thing to understand is that most problems people encounter in the market, especially the most frequent ones, are trading problems and not psychological. They usually result from a failure in one of the two prior stages: either a bad plan or weak execution of a good plan. As such, your goal in the review phase is to see how your plan performed, and to see how you performed at implementing the plan. You will then figure out what changes you can make, make them, and keep plugging away in the markets.

One of the most important things to realize is that our review is only as good as our records. In order for this to work, we need to be keeping track of relevant data. It starts with obvious things like our account value, P&L, and the trades that we have done. We should also have a rationale for each trade, either getting into or out of positions. But there is so much more to it and we should go that extra mile. We should know how much risk we were carrying at all times, and what kinds; how much were we losing or making on positions and how did it compare to our plans; and how did we do on different types of entry. Basically, the more data that we keep, the better. We can slice it and dice it as many ways as possible, judging our overall effectiveness.

Then, we go through our records and start to evaluate. The first check is how we did against our plan. Did we come anywhere near our return expectations? Did we follow our plan at all? What went right? What went wrong? This tells us how we did and whether or not we were on track with our plan. We want first to evaluate if our plan was in keeping with what I call the Basic Truths of Trading—the guidelines for what should be in a good methodology. We want to make sure that our plan, as conceived is consistent with them. You should always seek to tweak your methodology to get it more in harmony with the BTTs and with your own personality. You want to give yourself the best chance to succeed right out of the starting gate.

Next, we want to make sure that we executing the plan perfectly. A lot of times we have a good plan which should work and when we look back, we see that we didn’t implement it at all. When I was first learning the ropes, I would have a good idea and plan, only to talk myself out of it time and time again. It took me a long time to break this destructive habit. Thus, I can tell you from experience, it’s important to monitor how you did against the plan and to make sure that you are consistently implementing it.

Once you’ve identified an issue with Trading the Plan, it’s more complicated to solve it. First of all, a lot of it could be just mean that you need to clarify or simplify the plan to yourself. It’s easy to carry out a few simple instructions, whereas an overly complicated plan will be tough to follow. Next, you want find what’s most important or critical for your success and change that. It could be as simple as giving yourself a routine and to build habits that will make it easier. As I talk about in my post How to Be More Consistent in Your Trading, it could mean going about your daily routine differently. It could mean setting up different reminders and fail-safes. It could entail working with a partner. Whatever changes you need to make, then make them. It’s critical for your success to be sure that you can stick to a plan. This is the primary skill that you are using when you are in the markets, and it’s a crucial one to have.

If there is a psychological issue in your trading, such as fear of failure or if you are overly prone to fear and greed, then you can do something about it. I have written extensively about How to Remove Emotions From Your Trading or using Visualization techniques. The key thing to emphasize is that these are supplementary to the work that we have done. In my book, I cover these extensively over several chapters, with numerous exercises to get your mental game in tip-top shape.

The last part of Review/Tweak is goal setting. After you’ve taken stock of what you have done, you can properly formulate where you want to go. The most obvious goals are in terms of P&L, but I would encourage you to think about process goals as well. Maybe you want to boost your win rate by a couple % points, or to take your losses sooner. Those are worthwhile goals to pursue, and they would obviously translate into higher P&L. You could also set process goals that are related to testing our new things and exploring. That could mean trying out new setups or starting to research and dip your toe into new markets related to your core market. The key here is to draw on your experience and self-assessment, and then to determine what the next logical steps are. Altogether, you can alter what you’ve been doing and then create the routines and habits that you need to reach your goals.


This is a three-part conceptual model for any trader or investor using any methodology. I created this framework to help you structure your approach to trading. By separating the plan and the implementation of the plan, you can approach discretely the different constituent parts of your plan. This helps you to carry it out more effectively and to diagnose problems better. By emphasizing review/tweak, you are taking onboard the mindset of an elite performer who is constantly trying to perfect his game.

Being the best requires the right framework and the best implementation possible. My hope is that this framework will show a holistic way to think about investing and trading, one that will catapult you to greater success and elite performance.


*No relevant positions

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