Being a tutor for trading I have met many traders who don’t know how to develop a trading plan and the once which had a plan were too much difficult to apply.
Today we will see the importance of trading plan in trading and why it’s required. I’ll also let you know about how to develop a trading plan.
Trading plan and it requirement.
The plan should be considered as a pamphlet in which all the do’s and don’ts regarding the trading should be mentioned and also all the steps for developing an effective trading.
Also all your progress within a time period you wanted to achieve should be mentioned. It must have all the components regarding the trading so that before entering a trade you can observe whether everything satisfy the needs of plan or not.
For your plan to be more effective you should be mastered in the price action strategies and then start to develop your own trading plan.
The plan must also consist about each and every bit of the trading if it fails to have the required information or guideline about the trading then you’ll make a mistake and end up being emotional with the market.
So to keep emotions away from the trade you need to have a good trading plan with proper steps led down in it.
Necessities for a trading plan.
Listed down are the essential things to develop a good and effective plan, don’t make the list too long otherwise it can lead to confusions and difficulty in trading.
a) Always start with your plan with some positive ideas and thoughts which you can read each time before starting the trading.
b) You must mention about your goals you want to achieve in short time or long duration of time.
c) Write down about your strategy and also the process that how you will analyze the market.
d) Write in detail about your trading strategies, your risk to reward ratio on each trade should be laid down in the plan.
e) The plan should also consist of the money or amount which you think you can afford to lose.
f) Before entering any kind of trade you should check the trades thoroughly and must be answerable to yourself that why you choose this trade.
g) Even mention about the money which you will withdraw from the accounts every month after becoming a consistent profitable trader.
h) You must also mention that how much you will withdraw and on what bases if during other requirements.
i) When you trade in the market , end your trade with a positive attitude.
An example of one of the trading plan
This is only an example and not the actual plan.
Readable thoughts for keeping positive attitude.
Whenever you sit for trading make sure you are following your trading plan and enter with a positive mindset because it will help to keep the emotions aside from the trading.
Listing of trading goals.
You should have practical goals in trading. You should have realistic goals which can be achievable. Never hope for a unrealistic results from the market.
The process to analyze the market from the price action strategies.
Try to analyze the market conditions.
See whether the market is going up step by step i.e. whether it is progressing or not. Observe whether the market conditions are going up and down continuously by studying the charts.
Find out the resistant levels and core support.
once you come to know about the market conditions mark the core support and resistant level on the charts as that will help you to determine price action strategies accordingly.
Look for the setups which are reputed – you should be very clear about the price action strategies before preparing your trading plan.
Management of capital.
Most practical stop loss on the trade must be calculated in terms of rupees and not in terms of percentages.
The risk reward ratio must be identified if it is 1:2 or greater according to the market conditions , and nearby to the core support and resistant levels or not.
Also know about the trade setups and check them twice before trading.
Conclusion – I hope these all things you will apply in your trading to make your trading better.Once You realize the importance of trading plan , you start using it and observe its outcomes. It will really change your mindset regarding trading.
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