Making a trading plan

Humans have an ego and when it comes to trading they are not able to accept that they have made a loss on a trade. The mind is just not prepared for it. This, however, is not taken as a business decision but it is in fact looked upon as bad luck. The trader needs to understand that a stop loss is a decision that he took in the business that day and it just did not work out. This is important to accept the trader’s attitude to change.

 

If you find it difficult to have control on your emotions as a trader, then you could start using the automated trading system. The software takes trades based on an inbuilt algorithm and thus lets you keep your emotions aside.

 

Making a trading plan

You need to have a trading plan in order to be successful in trading. This is nothing but a plan to run your business. A good trade plan should have the following:

  • The trade plan should specify what the objectives and the mission are. You should write down the purpose of trading and what you want to achieve by trading. Also, write down why trading is important for you.
  • You need to jot down the trading strategy that you want to follow. This should be listed down in a step by step manner.
  • You need to select the portfolio. This basically means the asset classes that you wish to trade in and why do you prefer a particular asset.
  • If you have any competition, then write it down too. If you have an edge over your competitor, then list it down.
  • Are you able to handle the volatility in the market? You need to be strong psychologically to be able to handle the uncertainty in the market. Make sure that you are aware of what psychological implementations will it has when you plan to implement the strategy. Also, have a plan that lets you deal with emotions.
  • If you need anything that will help you to implement the trading strategy then write it down. Also, make sure to note own how you intend to carry forward the plan
  • The amount of capital that you are comfortable trading with should be written down. This is the money that you are ready to risk. You may be comfortable losing a percentage of capital invested in trading. If that so then makes a note of when to stop trading.

 

These are the key things that every trade plan should have. So take out some time to answer them and this will let you formulate a trading plan and also increase your rate of success.

 

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