Importance of Effective Trading Plan in trading profitably
Success is defined by the achievement of pre-established goals.
The key to becoming a successful trader is identifying, quantifying, strategizing, implementing, tracking, analyzing, learning and growing as a conscious person.
You see, there is no such thing as “easy money”. Let’s get this upfront right now, trading is not easy and not for just anybody.
- How many people do you know who have an idea of what they want out of life?
- How many people do you know who understand what makes them happy and what fulfills their needs?
Probably not many and this is where becoming a successful trader begins…..understanding yourself.
You define what success means to you.
If you don’t know what that is, how can you reach it?
Indeed, this process lies at the heart of building a trading plan for success.
There are two fundamental and interconnected strategies in becoming a successful trader:
1) A trader learns how to identify high probability trades with regularity and cut losses immediately. Eg: Today we prepared our trading plan for ICICI Bank, Buy above 1214 and 1232 Sl 1203… ICICI made high of 1232 and turned back even results which came out were pretty good.
Trading plan keeps you calm and give you levels to enter exit and where to cut the trades.
2) A successful trader has more winning trades with more profits than losing trades.
For example, if you make 20 trades and win 60% and the winners have an average gain of 10% and losing trades have an average loss of 3%, you will have a net overall gain of about 7% It is the combination of win-loss ratio and the average differential between profitable and losing trades that determines success…over time.
Trading is not about hitting home runs but hitting for average.
Traders develop a trading system which will provide a higher than chance win-loss ratio and try to make sure that profits have higher return on investment (ROI) than losing trades. In theory, even a less than chance ratio can still provide for profitable trading if there is a significant difference in profitable versus losing trades.
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