Creating a solid trading plan is one of the keys to becoming a successful trader.
Taking the time to think through and write down all the aspects of trading in a comprehensive plan, which includes the specific trading strategies you’re going to employ, can help you avoid ambiguity and potentially negative trading behaviours.
A plan for trading is similar to a plan for any other business. It’s essential to ensure that you stick to a well thought-out and tested approach to growing the business while minimising your risk.
Your trading plan should cover all of the most important aspects of the trading process. At the very least, this should include:
As a part of this plan, you should also keep a detailed journal of every single trade you place, so that you can carry out an on-going assessment of exactly how well you’re following your trading plan.
This journal should include specific reasons (according to the strategy used) for each and every trade entry and exit, the amount of profit or loss realised on each closed trade, and the percentage of the total account equity that each profit or loss represents.
Having the discipline to create a comprehensive trading plan and keep a detailed trading journal allows you to use this vital information to discern what exactly is working, what’s not working, and what needs to be tweaked to be more successful in the future.
Without a comprehensive trading plan and trade journal, you may find yourself making blind stabs at the market that won’t add anything constructive to your growth or improvement.
The practice of following a plan and recording the results can make average traders into progressively better traders.
Plus your own trading journal