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Without a Plan, You’ll Be Sure To Hit It!

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The title of this blog is so true. If you do not have a plan for your trading business, you are flirting with business failure! 

I speak from experience

10 years ago I set out to start my on trading business and I was so excited.  I had great experience because I had been in the financial world for the last 15 years, so I was feeling confident I could this!

I had everything in place to run a trading business, except for one critical item, I had no plan of attack, nothing to hold on to, nothing to give me direction or purpose. I thought having a desire to make a living was enough.

Suffice it to say, I started experiencing loss after loss and occasionally a win, and overtime I backed out of the business completely. Overtime I decided to re-enter the trading business, but this time with a different attitude!

I knew I needed something different this time. So, with some formal training and mentoring I discovered the reason my trading business did not work, I had no plan for success and certainly no direction. Well, today is a new day and I have learned. 

The only question left to answer is… have you learned? If so, you are at the right place and the right time to plan out your trading business.

What Is a Trading Plan?

A trading plan is a comprehensive decision-making tool for your trading activity. It helps you decide what, when and how much to trade. 

A trading plan should be your own, personal plan – you could use someone else’s plan as an outline but remember that someone else’s attitude towards risk and available capital could be vastly different to yours.

There are 7 easy steps to follow when creating a successful trading plan:

#1 What Is Your Motivation?

Figuring out your motivation for trading and the time you’re willing to commit is an important step in creating your trading plan. Ask yourself why you want to become a trader and then write down what you want to achieve from trading. A quick clue, your motivation is not as simple as, “I want to make money”. think through it, there is a real motivation behind your trading business, what is it?

#2 Decide Your Time Commitment

Work out how much time you can commit to your trading activities. Can you trade while you’re at work, or do you have to manage your trades early in the mornings or late at night?

If you want to make a lot of trades a day, you’ll need more time. If you’re going long on assets that will mature over a significant period of time and plan to use stops, limits and alerts to manage your risk, you may not need many hours a day.

It’s also important to spend enough time preparing yourself for trading, which includes training & coaching, practicing your strategies and analyzing the markets.

#3 Prepare Your Goals

Any trading goal shouldn’t just be a simple statement, it should be Specific, Measurable, Attainable, Relevant and a Time-frame (SMART)

For example, ‘I want to increase the value of my entire portfolio by 15% in the next 12 months’. 

This goal is SMART because the figures are specific, you can measure your success, it’s attainable, it’s about trading, and there’s a time-frame attached to it.

You should also decide what type of trader you are. Your trading style should be based on your personality, your attitude to risk, as well as the amount of time you’re willing to commit to trading.

If you want to make a lot of trades a day, you’ll need more time. If you’re going long on assets that will mature over a significant period of time and plan to use stops, limits and alerts to manage your risk, you may not need many hours a day.

It’s also important to spend enough time preparing yourself for trading, which includes training & coaching, practicing your strategies and analyzing the markets.

#4 Choose Your Risk Reward

Any trading goal shouldn’t just be a simple statement, it should be Specific, Measurable, Attainable, Relevant and a Time-frame (SMART). 

For example, ‘I want to increase the value of my entire portfolio by 15% in the next 12 months’. 

This goal is SMART because the figures are specific, you can measure your success, it’s attainable, it’s about trading, and there’s a time-frame attached to it.

You should also decide what type of trader you are. Your trading style should be based on your personality, your attitude to risk, as well as the amount of time you’re willing to commit to trading.

#5 How Much Capital Do You Have

Look at how much money you can afford to dedicate to trading. You should never risk more than you can afford to lose.

Trading involves plenty of risk, and you could end up losing all your trading capital (or more, if you are a professional trader).

Do your math before you start and make sure you can afford the maximum potential loss on every trade. If you don’t have enough trading capital to start right now, practice trading on a demo account until you do.

#6 Access Your Market Knowledge

The details of your trading plan will be affected by the market you want to trade. This is because a forex trading plan, for example, will be different to a stock trading plan or a crypto trading plan.

First, evaluate your expertise when it comes to asset classes and markets, and learn as much as you can about the one you want to trade. Then, consider when the market opens and closes, the volatility of the market, and how much you stand to lose or gain per point of movement in the price. 

For example: If you’re trading crypto, learn everything you can about the world of crypto, and so on for forex, commodities or whatever market you would like to trade in. 

You cannot learn too much!

#7 Start a Trading Journal

For a trading plan to work it needs to be backed up by a trading journal. 

You should use your trading journal to document your trades as this can help you find out what’s working and what isn’t.You don’t only have to include the technical details, such as the entry and exit points of the trade, but you should include the rationale behind your trading decisions and emotions. 

If you deviate from your plan, write down why you did it and what the outcome was. The more detail in your journal, the better.

I know for some of you, this sounds way over-the-top, this sounds way too detailed. But, I cannot emphasize your Trading Journal enough, it will be worth your time!

My Final Thoughts

With a trading plan implemented there is no guarantee of success, but your odds of success have significantly increased. Without a plan implemented, it is almost guaranteed you won’t experience success!

So, what is it for you? For me, a plan for my trading business is an imperative.

HAPPY TRADING

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