A trading plan means an outline that a trader needs to crate before trading. A trading plan will help you in your future trading as you already know why you are making the trade, what your goal is and how you will implement your plan. Traders should have the attitude to stick to their trading plans or they will not find trading beneficial. As a new trader, you should try to meet your expectation from trading and it will be possible only when you have a plan. In other words, it is easy to identify your success or loss when you set a goal.
Many traders consider trading plans as an unnecessary thing in trading and then, dismiss the wrong idea. They think that focusing only on the process of earning money will help them to attain success. They choose to give attention to the exciting aspects of a trade like chart spikes, news, and catalysts.
They don’t realize what big mistakes they are doing. This is because focusing on these things only helps in selecting the best stocks to trade. But if you want the best result, you should focus on your trading plans besides these factors. When you will be able to make a combination of your trading plans with the other things will get your desired result from trading.
Planning is the key to long term trading success
It is the trading plan which paves the way to success in the trading platform. When you have a proper trading plan you will easily understand the time of entering and exiting a trade. Starting trading without a plan is similar to gambling.
The trader who doesn’t have a trading plan will surely have to face a constant loss which makes them give up on day trading. If you don’t want to be a loser at the trading platform, then make a trading plan for your future trading.
Guidelines for creating a trading plan
Now, as you are aware of the benefits of making a trading plan, here is a guideline for you on how to start. Make sure you read the tips very carefully as they may change your life.
Setting your goal properly
You need to set a goal or target about what you are hoping for from a trade. Setting a goal will help you to make it materialize. With a goal, it will be easy for you to understand which trade is worthy for you and which are not.
Before entering a trade, you should consider how much risk you can take. Check here and learn more about advanced risk management technique so that you don’t have to lose a big sum of money from a single trade
Do your research
It is important to do proper research before entering any trade. Find out the big gainers, gauge the stock charts and analyze if there is any catalyst that can affect the value of a stock. You need to plan your exit and entry time in a trade based on technical analysis.
Make a decision on which position you will enter a trade. But you shouldn’t just focus on buying signals, rather give equal importance to your plan to exit. And try to determine your stop loss logically to avoid the possibility of loss. You should get out once your target profit is fulfilled.
Managing the trades
Develop the habit of writing down your plan. This writing habit will make you more focused on your work. When a trade is done, you should review the trade and analyze every detail of that trade. By keeping notes you can learn what was right or wrong on that particular trade. It will also help you in your trading plan.
The trading plan has the power to make your future trading effective. When you have a trading plan, you have the idea of when to enter a trade and when to exit which helps you to become more professional in the trading platform.