Short term traders, and day traders all focus on developing a trading plan. Any search of "Trading Plan" will yield countless articles on how to create one and the best ways to go about this. Today we make the assumption that you have created a plan of some kind and are actively deploying that plan in the markets. What do you do when that plan fails though?
The bad news is that a trading plan is an ever evolving machine that will constantly need adjusting over time. The good news is that adjusting your plan can be a very fun and rewarding process. Think of a trading plan that revolves in a cycle like this, plan > deploy > test > refine > repeat. Planning and deploying are the easy parts. Coming up with reasons you would like to trade, and trading are essentially what are involved in these steps.
Testing is where we get to the "success or failure" part of the plan. To be honest you will find that failure is prevalent in this phase. No big, successful business gets their plan right on the first try. It takes lots of failing tests to realize the correct path. Spend the most amount of your time here analyzing the failures.
Failures can come in many ways. Did you risk too much per trade? Were your profit targets too close compared to your risk? Were the entries just simply not good and need refining? There is so much we can analyze here and it's important to focus closely. It is very easy to be in a state of sadness, or defeat at this point so here is one tip to make sure your emotions are on the right side.
Keep your position size small while you are building your plan. Your first attempt at a trading plan will not be successful. Your second attempt won't be either. Keep your position size small so when you lose you can focus with a clear mind, not from a state of loss. This will allow you to clearly analyze your test results and move on to how to refine your plan. Happy trading!