A trading plan is your roadmap for what you are going to do in the markets. It's something that you have to create and is not optional.
1. How Many Trades will You Use to Evaluate Your Performance?
- The answer to this question is very simple. Base your evaluation period on the number of trades placed and not by the amount of time passed. Time is irrelevant in the world of trading.
2. Identify Your Key Performance Metrics.
- This can be your Risk to Reward Ratio for each trade.
3. What Time of Day Will You Trade?
- For day traders, It is highly recommended you limit your trading activity.
4. Define Your Trading Edge.
- Similar to the times of day you will trade; keep your trading edge down to one or two setups when starting. The more strategies you hope to master, the more difficult it will become to consistently make money in the market.
5. Identify Stocks to Trade.
- Have specific stocks to trade for the day or the week ahead. It can be in terms of news, technical analysis, backtesting results etc.
6. Place Your Stop Loss.
- Stop losses are not a negative thing, they are what keep you in trading business over the long run.
7. When to Exit
- The exit strategy should be as simple as when the stock crosses below a moving average or a trendline, it depends on your trading style.
8. How Much Money Can I Use per Trade?
- Without money management, you will not stand a chance of making it in the business of trading. For me, the amount of money I can use per trade is fixed. All the best trading plans have a limited risk of 1-2% per trade.
9. Trade Management
- Trade management is a crucial element that needs to be addressed in your trading plan. You must know your initial risk for each trade as determined by your initial stop loss before you risk any money on the market. You must plan when you will add to your winning positions and how you plan to exit your winning trades.
10. Take Breaks.
- Taking breaks is essential in trading, which is not discussed a lot anywhere. Taking a break for days or a week can help you to relax and gain more focus for days to come because trading is a mental game.
1. How Many Trades will You Use to Evaluate Your Performance?
- The answer to this question is very simple. Base your evaluation period on the number of trades placed and not by the amount of time passed. Time is irrelevant in the world of trading.
2. Identify Your Key Performance Metrics.
- This can be your Risk to Reward Ratio for each trade.
3. What Time of Day Will You Trade?
- For day traders, It is highly recommended you limit your trading activity.
4. Define Your Trading Edge.
- Similar to the times of day you will trade; keep your trading edge down to one or two setups when starting. The more strategies you hope to master, the more difficult it will become to consistently make money in the market.
5. Identify Stocks to Trade.
- Have specific stocks to trade for the day or the week ahead. It can be in terms of news, technical analysis, backtesting results etc.
6. Place Your Stop Loss.
- Stop losses are not a negative thing, they are what keep you in trading business over the long run.
7. When to Exit
- The exit strategy should be as simple as when the stock crosses below a moving average or a trendline, it depends on your trading style.
8. How Much Money Can I Use per Trade?
- Without money management, you will not stand a chance of making it in the business of trading. For me, the amount of money I can use per trade is fixed. All the best trading plans have a limited risk of 1-2% per trade.
9. Trade Management
- Trade management is a crucial element that needs to be addressed in your trading plan. You must know your initial risk for each trade as determined by your initial stop loss before you risk any money on the market. You must plan when you will add to your winning positions and how you plan to exit your winning trades.
10. Take Breaks.
- Taking breaks is essential in trading, which is not discussed a lot anywhere. Taking a break for days or a week can help you to relax and gain more focus for days to come because trading is a mental game.