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What is a Trading Plan?
What is a Trading Plan?
We all know and appreciate how important planning is. Most of the tasks we engage in on a daily basis involve a plan of some kind. When it comes to trading, having a good plan or strategy is of the essence.
A trading plan comprises a careful delineation of goals and objectives, and how you intend to reach them. A trading plan will be customized according to your particular preferences and aims. You need to be responsible for its setting up and subsequently for its execution as at the end of the day it can greatly affect your success or otherwise as a trader.
The forex market is a demanding market where so many changes occur within a short period of time. You need to be responsible, cautious and vigilant. This is even more important in case of high volatility.
Many traders like to present their trading plan in a checklist or tick list format as it often feels easier to follow. Point by point you will outline your strategy and in your trading operations you can then keep each point in mind and tick accordingly.
To get started it is highly recommended that you start trading on a demo account. There are various trading platforms where you can do this for some time so as to get a better idea of what it entails. You can also test your plan until you feel confident about it. As a general rule it is best to have a simple plan that is practical and realistic, rather than one which is too complicated. Once you feel more confident you can then move to a real account. Having said that it is important to bear in mind that no trading plan is infallible or perfect. However you can make adjustments and improve as you go along and gain more experience and insight.
Many traders like to ask about what elements a trading plan should include so as to be a good one. First of all as already mentioned the plan is a personalized one, so in reality what works well for one trader might not be ideal for another trader. However there are some fundamental elements that should be present in any trading plan, including:
- Your trading profile as a trader you are going to be backed up by some training and experience, as well as your personal preferences and time commitments. You thus need to choose markets that can best suit your preferences accordingly. You should have a clear idea of what your motivations and aims are, as well as your trader mentality.
- Goals be clear about your goals and objectives as these will ultimately lead the way. Detail the various steps you intend to take and your planned route. Try to be as specific and as clear as possible. Determine the capital, whether you will be trading short or long term, and at what stage you feel you are at.
- Trading your trading plan should delineate the steps you shall be following for your day to day trading. This will include the markets where you will be operating, which operations seem to be best for you, your time commitment and how often you will be reviewing information and charts.
- Methodology analysing your trades includes a methodology. This can help you determine what works best for you, and what is not that ideal. You can gain a much better idea of your operations in this manner. Keep an eye on key aspects such as market trends, support and resistance levels etc.
- Money management monetary control is key to success. You need to be careful how you will be planning and managing your various investments. This also includes risk management. Consider the size of the operation, tools to be used such as Take Profit or Stop Loss, etc.
When trading it is important to follow your plan as well as engage in a way that you feel is prudent and realistic. You need to avoid rushing, and patience is important too. Try to keep an eye on yourself and aim at being perseverant and responsible in your actions, but without being too impulsive or greedy.
We all know and appreciate how important planning is. Most of the tasks we engage in on a daily basis involve a plan of some kind. When it comes to trading, having a good plan or strategy is of the essence.
A trading plan comprises a careful delineation of goals and objectives, and how you intend to reach them. A trading plan will be customized according to your particular preferences and aims. You need to be responsible for its setting up and subsequently for its execution as at the end of the day it can greatly affect your success or otherwise as a trader.
The forex market is a demanding market where so many changes occur within a short period of time. You need to be responsible, cautious and vigilant. This is even more important in case of high volatility.
Many traders like to present their trading plan in a checklist or tick list format as it often feels easier to follow. Point by point you will outline your strategy and in your trading operations you can then keep each point in mind and tick accordingly.
To get started it is highly recommended that you start trading on a demo account. There are various trading platforms where you can do this for some time so as to get a better idea of what it entails. You can also test your plan until you feel confident about it. As a general rule it is best to have a simple plan that is practical and realistic, rather than one which is too complicated. Once you feel more confident you can then move to a real account. Having said that it is important to bear in mind that no trading plan is infallible or perfect. However you can make adjustments and improve as you go along and gain more experience and insight.
Many traders like to ask about what elements a trading plan should include so as to be a good one. First of all as already mentioned the plan is a personalized one, so in reality what works well for one trader might not be ideal for another trader. However there are some fundamental elements that should be present in any trading plan, including:
- Your trading profile as a trader you are going to be backed up by some training and experience, as well as your personal preferences and time commitments. You thus need to choose markets that can best suit your preferences accordingly. You should have a clear idea of what your motivations and aims are, as well as your trader mentality.
- Goals be clear about your goals and objectives as these will ultimately lead the way. Detail the various steps you intend to take and your planned route. Try to be as specific and as clear as possible. Determine the capital, whether you will be trading short or long term, and at what stage you feel you are at.
- Trading your trading plan should delineate the steps you shall be following for your day to day trading. This will include the markets where you will be operating, which operations seem to be best for you, your time commitment and how often you will be reviewing information and charts.
- Methodology analysing your trades includes a methodology. This can help you determine what works best for you, and what is not that ideal. You can gain a much better idea of your operations in this manner. Keep an eye on key aspects such as market trends, support and resistance levels etc.
- Money management monetary control is key to success. You need to be careful how you will be planning and managing your various investments. This also includes risk management. Consider the size of the operation, tools to be used such as Take Profit or Stop Loss, etc.
When trading it is important to follow your plan as well as engage in a way that you feel is prudent and realistic. You need to avoid rushing, and patience is important too. Try to keep an eye on yourself and aim at being perseverant and responsible in your actions, but without being too impulsive or greedy.