The trading plan means a flow of trading work planned in a written form, it is a structured method. A trading plan if followed properly can help a trader to transform himself to be a successful trader.
HOW TO CREATE A TRADING PLAN –
1.Acknowledge the reason for trading
5. Record everything
6. Decide a limit of capital
7. Entry and Exit levels
1. Acknowledge the reason for trading –
There is a famous quote “if you want to stop, remember why you started.” Answer why are you starting trading and it will work as motivation, whenever you will have thoughts that you should stop trading and whenever any problem will arise, listing down a reason of trading in the trading plan will help you.
2.Time devotion –
Decide a particular time that can be devoted to trading. Do you have the liberty to be flexible to the time or only decided time can be devoted. With the clarity of time devotion.
3.Risk appetite –
Risk tolerance capacity can make huge difference in trading. Pre- deciding the risk appetite helps a trader in trading. Every day and on every trade the market price and maybe the script you are trading in will change. Therefore understanding the risk-bearing capacity in advance will help us understand what our real risk exposure is.
“If you don’t invest in risk management, it doesn’t matter what business you’re in, it’s a risky business. – Gary Chon
4. Record everything-
Now, what is considered relevant information-
*Equity put in to open a position
*Time when position opened
*The outcome of trade
*Revised positions if any
*Reasons to revise a position
*Strategies on each position
Now this will look very much data to record for a single position. But maintaining a proper record will save your money because for reference or to understand where you are going wrong, what improvements are needed.
“It is not a mistake to make a mistake, but it is a mistake to repeat the same mistake.”
To save yourself from repeating your mistakes, a proper record maintaining is a great hack.
5. Decide a limit of capital –
Usually, traders complaint that within some days of starting the trade, their whole trading account wipeout. It is because of the reason they changed the amount of capital on every trade as per their expectations or desire of profits or out of the fear of loss. If the limit of capital is decided in advance this can help to save the capital.
6. Entry and Exit levels –
This will be based on the market or on the trade, but deciding maximum levels in points or pips can help in strategizing in the running market.