If you are a new trader and want to achieve success in trading, a trading plan can make you 99% successful. The properly designed plan helps you to direct your choices and assist in analysing the market trends without difficulties. A trading plan would help you to maintain focused objectives and prevent making the wrong choices.
A trading plan consists of determining your objectives, level of risk, and investment time. You must know how to create the best trading plan and how it allows you to succeed in trading.
What Are Trading Plans?
A trading plan is an important step towards success in the markets. It is a systematic process that gives you an idea of how to trade, how to take risks and how to make your strategy. Having a clear roadmap will help you to avoid unthoughtful moves and tend to follow a regular process of reaching your financial targets by your emotions.
Example of a Trading Plan
Here is an example of the trading plan, including the use of MT4 for PC to track trades and analyse market trends.
-
- Motive: “I desire to know the financial markets and invest in a long-term wealth portfolio.
- Time Necessity: I will take time to trade and plan each week, which is 10 hours.
- Goals: Within 18 months, I want to have my portfolio up by 20 per cent by making three quality trades a month.
- Risk-Reward Ratio: “I will have a ratio of 1:3 risk to reward per trade.
- Capital: “I will have a capital of $1,000 to be used during the initial six months of trade.
- Markets: I will conduct trading in the forex market, but I will concentrate on the currency pairs that I am familiar with.
- Review Process: “I will review my trades every week and conduct a monthly performance review.”
How to Make Your Trading Plan?
A trading plan helps you define what you want to achieve, how much risk you’re willing to take, and the markets you want to trade. Here are the steps you need to follow while making a trading plan.
- First, define why you’re interested in trading and what you want to achieve.
- You have to decide how much time you can dedicate to trading.
- Set clear, measurable, and achievable trading goals.
- Choose the risk level and reward expectations for each trade.
- You must decide how much capital you’re willing to risk.
- You have to learn about the markets you want to trade in.
- At the end, record your trades, decisions, and emotions to track progress.
Why Do You Need a Trading Plan?
- You will avoid making emotional decisions by working within the parameters you have set.
- A trading plan will make you stick to a trading discipline, and it will boost your overall performance.
- Since you will be tracing your trades and reviewing them regularly, you will be able to keep on perfecting your strategy and know what not to do next time.
Conclusion
If you’re new to trading and have no idea where to start, a trading plan can help you achieve 99% success. But what exactly is a trading plan, and how is it created? I have given a guide that helps you so you can create a great trading plan.
