An overall goal
It is hard to reach a goal if you do not have one.
However, the goal needs to be realistic as well, and this is an area many traders lose focus in, which is fueled by an industry that commonly misleads traders with false information and fake returns.
A list of instruments to be traded
If you are trading forex, which currency pairs will you trade? If you are trading stocks or commodities, how will you select the stocks or commodities to trade?
A time frame for trades
How long will you be in a trade? Will you trade long term? In other words, will you hold the position for many weeks or more? Swing trade, which is holding the position for a few days? Day trade, which is holding the position for a day or two? Intra-day trade, which is holding the position for a few hours, or scalp trade which is holding the position for a very short period of time?
A way to select direction and entry
In other words, a set of rules that tell the trader when and how to get into a trade. This is commonly referred to as 'an edge' and/or an 'entry.'
A way to exit the trade
This includes both a way to take profits when the trade is a winner, as well as a way to get out of the trade to limit your losses when the trade is a loser. Stop movement and trailing stops to lock in profit and more.
Risk and money management
All successful trading plans follow a strict risk and money management system. Successful traders understand and accept that losses are a part of trading and make their number one goal the protection of their trading capital.
You goal is not to be right on every trade. You goal is to fully understand that you will be wrong and lose money on a good percentage of your trades. Therefore your plan should concentrate on making as much as you can when you are right, in other words letting your profits run, and losing as little as you can when you are wrong, in other words, cutting your losses off quick so that, over time, your system is profitable.
It is hard to reach a goal if you do not have one.
However, the goal needs to be realistic as well, and this is an area many traders lose focus in, which is fueled by an industry that commonly misleads traders with false information and fake returns.
A list of instruments to be traded
If you are trading forex, which currency pairs will you trade? If you are trading stocks or commodities, how will you select the stocks or commodities to trade?
A time frame for trades
How long will you be in a trade? Will you trade long term? In other words, will you hold the position for many weeks or more? Swing trade, which is holding the position for a few days? Day trade, which is holding the position for a day or two? Intra-day trade, which is holding the position for a few hours, or scalp trade which is holding the position for a very short period of time?
A way to select direction and entry
In other words, a set of rules that tell the trader when and how to get into a trade. This is commonly referred to as 'an edge' and/or an 'entry.'
A way to exit the trade
This includes both a way to take profits when the trade is a winner, as well as a way to get out of the trade to limit your losses when the trade is a loser. Stop movement and trailing stops to lock in profit and more.
Risk and money management
All successful trading plans follow a strict risk and money management system. Successful traders understand and accept that losses are a part of trading and make their number one goal the protection of their trading capital.
You goal is not to be right on every trade. You goal is to fully understand that you will be wrong and lose money on a good percentage of your trades. Therefore your plan should concentrate on making as much as you can when you are right, in other words letting your profits run, and losing as little as you can when you are wrong, in other words, cutting your losses off quick so that, over time, your system is profitable.
