A trading plan - What is it and why do you need one?

4 août 2021

In one of my previous publications I stated that the majority of new traders fail in the first 90 days of their trading "career". I also mentioned that one of the reasons for it was the lack of a trading plan.

So what is a trading plan and why do you need one?
Rather than explaining, I decided to give you an example. Below is an elaborate example of a trading plan. If you read through it, you'll understand what purpose it serves on a daily basis.

The goal of this publication is to give you an idea on how to build one for yourself that fits YOUR needs.


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TRADING PLAN

1️⃣Trading Philospophy/Psychology

• I believe successful trading is a learned SKILL. It is a science, and consistent profitability is achievable and can be duplicated.
  
• I define success in trading as total financial freedom. The ability to stay home with my family. The freedom to choose my own schedule, and the ability to provide those I love with every excess, comfort and opportunity possible.
  
• My mental state is a major factor in my success as a trader. I will constantly assess and adjust my trading state in order to mainatin a mindset conducive to greatness.
  
• I accept as a fact, that my success is unlimited. I can achieve anything. Where others see impossibility, I will see unlimited opportunity.
  
• I will be disciplined in every regard, and at all times as it relates to my trading plan and execution. I recognize that I am in the markets to become a full time trader. I am interested in profit. Trading is my business.
  
• I accept as a fact that I will have losses. I will apply strict money management rules in order to limit those losses and maximize my profits.
  
• Markets control themselves, my sole goal is to participate.
  
• I trust my setups as I have backtested them and know how they perform historically.
  
• I am an aggressive swing trader in the forex market. I use harmonic patterns and structure as my basis for entry in the market.
  
• I will continue to educate myself on every aspect of trading, with the goal of broadening my market knowledge, and expand that knowledge into cryptocurrencies.
  
• Setbacks are expected, but failure is not acceptable. There is only one option, only one end ... Success...
  

2️⃣Trading Goals

• On a daily basisI will try to find 2 good trade setups that answer my risk/reward criteria. I will not trade more than 2 setups per day.
  
• My goal is to reach 60% profitability, which at a Risk:Reward ratio of minimum 1:1 will guarantee constant increase of my equity.
  
• On a monthly basis I strive to achieve an equity growth of minimum 5%.
  
• My goal is to become a full-time trader. In order to switch to full-time trading and quit my daily job, the following requirements need to be met:
  
• A reserve capital needs to be built up that allows to maintain my current lifestyle without any other source of income.
  
• 50% of my total average profits per month should cover my monthly expenses, allowing me to live off trading while building my equity
  
• If above requirements are met on average 6 months in a row, I will quit my daytime job and commit to full-time trading.
  

3️⃣Daily Routine

• Each morning I will wake up no later than 07:00, take a shower and have breakfast.
  
• The latest at 08:00 I will start my analysis and look for potential trade setups.
  
• I will also check what news is relevant for that day.
  
• While I am still on my daytime job, I will enter my trades with a market order if setup occurs during analysis time, with a limit order if it falls within my daytime job working hours. Limit orders will be avoided as much as possible once I amable to revert to full-time trading.
  
• On Mondays I do not place any trader before the US session open. On Fridays I will not place any trades after the NY mid-session.
  
• I will not open a new trade within 4 hrs before an important news even is expected/planned that might have an impact on the currency pair in question. I will aslo wait at least 1 hour after the news event to open a new trade for that pair. Therefore it is extremely important to be aware of upcoming news events.
  
  4️⃣Technical Analysis
  • I will perform a top-down analysis of every pair that I trade during my daily technical analysis.
    
  • I will determine the daily timeframe to determine whether the pair is trending or in consolidation and to determine relevant structure zones.
    
  • After that I will go to my trading timeframe 120/240 minutes to look for potential trade setups.
    
  
  
  5️⃣Trade Setups
  🅰Structure Trades
  
  ➖Bounce of structure:
  ►Trading Method:
  check for minimumof 3 instances within the last 15 days where price action bounced off the structure, wait for candle closure and enter next bar market
  ►Targets and Stop Loss :
  § Trend following
  - TP1: 75% position size at .618 retracement of previous move - roll SL to 0.382 fib
  - TP2: 20% position size at 100% retracement of previous move - roll SL to 0.618 fib.
  - 5% of position remains open with a trailing stop 25 pips (and maximum.618 fib)
  § Counter trend & Consolidation
  - TP1: 75% of position size at .382 retracement of previous move - roll SL to break even
  - TP2: 20% of position size at .618 retracement of previous move - roll SL to .382 fib
  - 5% of position remains open with a trailing stop 25 pips (and maximum .382 fib)
  
  ➖Break of structure:
  ►Trading Method:
  wait for break and close below/above previous structurewith a min of 20 pips, then look for a retracement into previous structure. If structure holds on candle close, enter next bar market.
  ►Targets and Stop Loss:
  - TP1: 75% at lowest low/highest high of the move that broke the structure, roll stops to break even
  - TP2: 20% at 1.618 extension of previous move - roll stops to previous LL/HH
  - 5% of position remains open with a trailing stop 25 pips (and max previous LL/HH)
  
  🅱Harmonic Patterns
  
  ➖Bat pattern .... *
  *Note : I have omitted the rest of the setups here to keep the publication a bit shorter
  
  6️⃣Traded currency pairs
  • EURUSD
    
  • GPBUSD
    
  • USDCAD
    
  • EURNZD
    ...
    
  
  
  7️⃣Weekly evaluation
  In order to improve my trading analysis and to learn from my mistakes, during the weekend I will do an analysis of my trades during the week. To be able to properly analyze trades:
  
  • I will keep a journal of my trades with entry, profit targets and stop loss.
    
  • I will alos make ascreenshot of the analysis done before entering the trade and the result after the trade is completed
    
  • On the completed trade screenshot, I will makr any related events that might have influenced the trade.
    
  • I will make a list of eventual mistakesmade and create an action plan in order to avoid them in the future. This action plan will be added to this trading plan.
    
  
  
  8️⃣Final Notes
  This trading plan is my road map to success. Not following this plan will result in inconsistent results and potential failure. Sticking to the plan is a must in order for my trading business to succeed andto becomean independent consistently profitable trader and free myself from working for an employer. It will give me financial freedom and is the only way I will be able to reach my goals.
  💪🏽 STICK TO THE PLAN! 💪🏽
  
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  💡 Alright, so now you saw an example of what a trading plan could look like. Having a clear and concise trading plan is crucial for concistent trading results.
  
  ❔ Do you have a trading plan? Does it look similar? Is there something you think is missing?
  ❔ If not, was this publication helpful and will you create one for yourself? Why? Why not?
  
  Look forward to your comments below. Oh, and if you like this post, you know what to do! 👍🏽
  
  Thanks for your visit! 🙏🏽
  PS : also check out my other educational ideas below