A trading plan
How to create a successful trading plan
There are few steps to create a trading plan which would result in a successful one after you put it into action.
With a well-designed plan, you will have the right guidance on which market to trade, which assets to chose, when to take the profits, when to stop your losses, and to find better opportunities.
What is a trading plan?
A trading plan is a necessary decision-making tool for your trading activity. It helps you define what to trade when to trade and how much to invest. A trading plan should be a mirror of your personal needs, goals- you can refer to someone else’s plan, but someone else’s attitude toward risks and willing to keep investing could be very different to yours.
You can tailor your plan with anything you might find useful, but it should always include:
▸ Your reason which drives you to trade
▸ The time commitment you want to make
▸ The trading goals
▸ The attitude to risk
▸ Your available capital for trading
▸ Personal risk management rules
▸ The markets you want to trade
▸ Your strategies
▸ Steps for record keeping
Why do you need a trading plan?
A trading plan is necessary because it helps you make decisions in cold logic and define the parameters of your ideal trade. A good trading plan will help you to avoid making emotional decisions in the most critical moments. The benefits of a trading plan include:
▸1 Easier trading
▸2 More objective decisions
▸3 Better trading discipline
▸4 More room for improvement
How to create a trading plan?
There are seven easy steps to follow when creating a successful trading plan:
▸1 Outline your motivation
▸2 Decide how much time you can commit to trading
▸3 Define your goals
▸4 Choose a risk-reward ratio
▸5 Decide how much capital you have for trading
▸6 Assess your market knowledge
▸7 Start a trading diary