Trading is a very complex and detailed process. Those who are not familiar with this industry have a very vague perception about doing successful trading. Today trading is a very active topic all over the world and global pandemics have affected this industry in a positive way since a lot of people were sitting at home on their computers and getting more and more information about it.
The trading is very complex and demands a lot of energy and time from traders. In order not to be affected by all those rapid changes and not to make decisions under pressure and quickly and risk it, traders are suggested to make a trading plan. A trading plan is a decision-making tool for your trading activity. It helps you decide what, when, and how much to trade and it should be created personally by you and not use someone else’s plan.
A trading plan is useful for easier trading, making more objective decisions, and having better trading discipline. It can involve anything that you find useful for you, motivation for trading, how much time you want to commit, what your trading goal is and your attitude towards risk as to the algorithm works accordingly. Moreover, it is good to be involved in the trading plan, the information about your available capital for trading, the markets you want to trade, your strategies, and steps.
As we have mentioned already, it is important to make sure not to mistake the trading plan with the trading strategy. Trading strategy is completely different and there is a list of strategies to use in Forex trading that can help you define your trading process. An example of a simple trading strategy would be to buy bitcoin when it reaches $5000 and sell it when it reaches $6000. Some of the trading plans are not as profitable as others, thus the article will review the main steps which will be helpful for creating the winning trading plan.
Before starting the actual trading process you need to make sure that the system is working according to the plan. The process is a battle of giving and taking and the plan should be thorough even in the case of risks. The real pros of the trading plan are to be prepared for taking the profits when the others do not have the actual plan of how to maneuver.
For a successful trading process, you need to make sure to be mentally prepared for it. Emotional and psychological readiness is the key in this case. Good sleep and relaxation are very important in order to succeed in a difficult trading complex.
Set Risk Level
Your risk portfolio should be outlined in the trading plan. It is dependent on your trading strategy and style. The risk approximately should vary from 1% to 5% of your portfolio on a given trading day. It means that if you lose this amount in a day, you get out of the market and pause.
You should set realistic profit targets and a risk/reward ratio. It is recommended to set weekly, monthly, and annual profit goals in dollars or as a percentage of your portfolio, and reassess them regularly.
Do the homework
Before the market opens, it is better to see the events that are going on around the world that might affect the market performance. Make the report about it to decide whether it is worth involving the exact day or not. However, you should not confuse it with gambling, because trading ahead of an important report is often a gamble because it is impossible to know how markets will react.
Set Exit / Entry Rules
Most traders make mistakes, when they concentrate on the buy signals, however, it is very important to pay attention to exit when and where. It is good to know how to accept the loss because successful traders have usually lost more times than winning. There are at least two potential exits for every trade. First, what is your stop loss if the trade goes against you? It must be written down. Mental stops don’t count. Second, each trade should have a profit target.
Along with the exit rules, you should also set the entry rules. A standard entry rule could be worded like this: “If signal A fires and there is a minimum target at least three times as great as my stop loss and we are at support, then buy X contracts or shares here.“
Many successful traders are excellent at keeping records because they want to know, in case of successful trade, how did it happen and when ( analyzing perfect trading hours is very important too). Other than the wins, then write down the losses as well, because this interests them more, in order not to make another mistake again.
Finally, to summarize, trading is a complex and difficult process that requires a clear understanding of what you are doing. It cannot be done as a part-time job as it requires a lot of energy, time, and attention and not everything can be done by the software. In order to make the process more profitable and convenient for you, it is a good idea to make a trading plan, which will be created personally for your trading strategy and the information will be shared only with you.
A good trading plan means that you are halfway there in achieving your goal because it prevents you from being affected by impulses and making risky decisions. The plan can also tell you when to start and when to stop and it is extremely helpful since you are sitting at the charts and numbers and it can really make the trader lose the perception of reality.