TRADING PLAN

Creating a trading plan in advance and sticking to it is fundamentally an important action before exposing your capital to the market. In a few words, a plan describes what to do, why, when, and how to do it.

Not working with a plan is one of the reasons traders fail. An optimal trading plan should describe your major goals, what markets and specific assets to trade, how to keep records to review your historical actions and the results of your actions and how to control risk by the risk management plan.

A good plan should have answers for all of below:
1. How to manage trades;
2. What techniques or methods to employ;
3. What rules to use for entry and exit;
4. What pre and post-market activities to perform;
5. What checklists to use;
6. How to educate yourself;
7. How to act in case of a calamity.

Understanding a trading plan
Your trading plan should have as many details as possible. Even when it comes to trader’s emotions control and keeping the focus alive, your plan should have advice, solution and certain strategy. Of course, we are not telling you that there is one fixed plan which will work the best for all of you, you can tailor it as you want, depending on your trading personality. Plan your trade and trade your plan!

Skill Assessment
Trading the markets is a battle of give and take. The real pros are prepared and take profits from the rest of the crowd who, lacking a plan, generally give money away after costly mistakes.

Mental Preparation
Many traders have a market mantra they repeat before the day begins to get them ready. Create one that puts you in the trading zone. Additionally, your trading area should be free of distractions.

Set Risk Level and Goals
What portion of your portfolio should you risk on one trade? This depends on your trading style and tolerance for risk. Before you enter a trade, set realistic profit targets and risk/reward ratios. What is the minimum risk/reward you will accept?

Do Your Homework and trade preparation
Before the market opens, you should check what is going on around the world? Are the biggest markets up or down? What are the economic or earnings data that are due out and when? Post a list on the wall in front of you and decide whether you want to trade ahead of an important report.

Set Enter and Exit Rules
Before you enter a trade, you should know your exits. There are at least two possible exits for every trade. First, what is your stop loss if the trade goes against you? It must be written down. Mental stops don’t count. Second, each trade should have a profit target.

Keep Excellent Records and measure your performance
Many experienced and successful traders are always keeping records. If they win a trade, they want to know exactly why and how. More importantly, they want to know the same when they lose, so they don’t repeat unnecessary mistakes. After each trading day, adding up the profit or loss is secondary to knowing the why and how.