Why a Trading Plan Is Important?
Some traders make the mistake of trading without any plan set on their mind. They just do what they want to do, like trade, trade and trade. But do you know that having a good trading plan is important?
Yes, having a trading plan can keep your mind in focus. It keeps you in the proper direction. Remember that you must be consistent in your trading routine since this will let traders measure their ability in doing so.
If you have a very good plan for trading you will more likely make a sounding profit. Just follow your plan and stick with it no matter what. Also having a trading plan can make your trading business a business. All kinds of business have plan, if they don't then they will not succeed.
So now you are convinced that you need to have a trading plan. The next thing that might come to mind is that what should be inside your trading plan?
Good question, the following should be included in your trading plan:
1. Trading System
This should be the core of your trading plan. Your trading system should be well tested enough to be sure that it is properly working. The following information should be in your trading system: time frames that you are using, your criteria for entry points and exit points, the risk that you are willing to trade and the currency pairs that you are trading and the amount you are trading.
2. Trading Routine
Your trading routine is the critical part of your trading plan. This will identify three significant things that you need to consider: first is the time for analyzing the market and the plan that you make your trade, second is the time that you will actually view the market to make the trade and third is the time that you will have to evaluate your decisions while trading.
3. Mindset
Do not let your emotions take part in your trading business. Set your mind that you are a trader and your emotions should not mix with other details in your life.
4. Weakness
Most people do not want to talk about their weaknesses. But in this case, you have to. Identify your weaknesses and resolve them. Resolving a weakness may happen overnight. Just keep track of your weaknesses and gradually work on it.
5. Set your Goals
Making a lot of money is not a goal. Think about it, what do you really want to achieve as a trader? Set your goals, visualize your goals and work your way up to achieve it.
6. Keep a trading journal
All your transactions should be well recorded in a journal. This is personally made by you. List down all your trades, successful or not, list all your decisions and why you did so. You will notice that after sometime, you will see your own progress. Read your journal so you will learn from your own experience.