Lesson #69 The Trading Plan

One may and have come so far in education, professional background and expertise and yet still have not come across much success. In this case, it may be caused by not having a trading plan.

No matter the amount of information you have, but without a good trading plan and discipline, success can be very elusive. Imagine your trading plan as your guide map to profitability. It will be a useful reminder of how you can make money in this complex market. Though a trading plan may not be required, the path to actually making money may prove to be more difficult.

Here are some reasons why it is still best to have one:

Two Good Reasons for Having a Plan

First Reason: It keeps you on track to your goals

A key element in any trading routine is consistency. This allows you to measure actual performance against pre-planned objectives. Having a proven trading system is one thing, but sticking to the routine is another. A trading plan will keep you updated on your progress.

Second Reason: successful traders always have plans

Most successful businesses start with a plan. Whether it is a draft or a full-scale feasibility study, nearly all-successful enterprises started with one. Retail giants, software companies and just about every big name all started out with in drawing boards, spreadsheets and trial simulations that all required a plan. The biggest difference between the top companies and the little players is that they have a successful business plan that guided them to the path of success.

The Trading Plan

Trading plans can be in any form, template, standard but the most importantly is that you have a plan and do everything to follow it.

Here are some of the most essential elements that every trading plan should have:

1. A trading system

This is the core of every trading plan. This system should be one that you have mastered and have simulated for at least a few months on a demo account.

All the necessary information about your system should be included such as: time frames, criteria for entries and exits, risk during each trade, currency pair(s) you trade and how many lots you trade.

2. A trading routine

This is crucial for it will determine at least three very important things: analysis of the market and plan your trades, timing your actually watch of the market to take trades, and evaluating your actions during your trading day.

3. Good mindset

A good trader tells you that one of the hardest things to do when trading is controlling your emotions from it. This is part of your trading plan will best describe what frame of mind you should be in when you are trading.

1. Seeing what is on the charts and not what you want to see.

2. Trade only what is visible and not to deviate because of emotional impulse.

3. Avoiding retaliation on the market after losing on a trade.

4. Make a losing trade a learning experience and move on.

4. Your weaknesses

Everyone has their own weakness, it’s simply a matter of admitting them and acknowledging the fact they need to be fixed in order to become a better trader. The most difficult tasks are aggravated by our hesitation to admit and take on our fears. Here are objective ways to keep track of things to do to get through the challenge. Identify a weakness in your methodology, and resolve to only fix that weakness. Focus on not making that specific mistake for as many trades as it takes until it is weeded out of your system

1. Do not overtrade even after losing on a position. Do not get upset and forget trying to get “revenge” on the market.

2. Avoid exiting too early on trades.

3. Stick to the rules of your system every time.

4. Stick to your money management rules every time

5. Set your goals

You can define success by your own goals. Whether they are personal goals, long-term business, or investments, it is really up to the person. Though the ultimate goal of any business is to make a profit, it may sometimes differ on specific objectives well beyond profit making. Some goals don’t even have to be about making money. In some cases it is to gain discipline or more confidence to be used as your motivation when times get tough.

6. A trading journal

Almost every trader knows the importance of a trading journal. . No matter how well or how bad you did, you most certainly need a way of reviewing your activity. This can arguably be the most useful tool of any forex trader. Here you must put down all your trades and why you took them. Later you can look back and evaluate your trades and see how you are progressing. Other indicators and trading methods are useless if you have no way of knowing how well they have worked for you. This will enable you to know what is working or not. More importantly, being able to go back objectively and see your entire performance is extremely valuable. This can the easiest indicator method on how your plan is going and how closer you are to achieving your goals.

Bottom Line:

Your trading plan will be your SUCCESS plan. All you have to do is stick to it.

All the trading tools in the world are useless but if you don’t have a plan on how you will use them, you will never be successful.

“One does not plan to fail, one only fails to plan!”