A trading plan is a set of rules, to define your trading activity. The time you sit in front of screen till the close of trade everything should be documented in trading plan. It has your entry,exit, profit booking SL levels and also your psychological strength and weakness. It can be an extremely useful tool to help you focus on planning and executing your trading strategy.
There is no absolute blueprint for the perfect trading plan – every trader is unique, and different styles suit different people – Let me share the universal things which should be included in trading plan.
Without a trading plan you’re just gambling in the markets.
Understanding about Yourself
As i always say If you want to be a better trader know more about yourself.
Ask the Following questions to yourself on the 1 page of trading page to get the clear and Honest picture of yourself.
- How do you see yourself as Trader currently.
- What sort of trader are you now?
- Do you have a back tested trading strategy ?
- What time frame you want to trade ?
- What Kind of leverage i can take and maximum Loss after which i need to stop trading
- How much capital do you have to trade with?
- What is your trading Goal ?
- Is it achievable and realistic Goal ?
- Are you psychologically strong ?
- What you are currently doing to improve your trading?
General trading plan rules
Choose a trading strategy
Start with one single strategy – just pick one to follow. There are 100’s of strategy but you need to Stick to 1 strategy only. Make a decision and a commitment to follow that strategy with discipline for at least 100 trades. it’s about training your brain to trust and follow the strategy and to keep your emotions in sync.
I know many traders who don’t want to invest the time to trade only one strategy and they keep jumping from 1 startegy to another in search for holy grail and finally leave the stock market saying No one can make money.
Define your Trading strategy
What ever strategy you follow You need to clearly define
- Profit Booking Level
- Stop Loss – Risk Management
- Trade Size – Money Management
- Maximum Loss due to conditions which you cannot manage like internet not working etc.
- Series of Loss making trades which can happen
While entering the trade you should be confident and do not have second thought. End Result Loss or Profit should not bother you.
Record your progress
Develop a clear and concise method of recording your trades. It is critical in planning a long-term strategy to be able to view your past and present trades, both from a learning perspective but also to keep track of which markets you are, and have been, exposed to.