Every trader must have a well-thought-out trading plan. This plan serves as a guide for taking the best steps in trading and achieving the desired profit. Consistency in executing the trading plan is the key to success in the trading world. Like any conventional business, traders need to set main goals and strategies in their trading plans.
Main Goals in a Trading Plan
A trading plan should include clear strategies, specific target markets, cost calculations, and the probability of achieving profits. If the initial plan does not go as expected, traders need to have a backup plan (Plan B) to ensure their trading business does not come to a halt.
Avoid Trading Based on Speculation
Many traders trade based on intuition, rumors, or mere speculation. However, this approach is not sustainable. To achieve optimal results in the financial markets, traders need a well-prepared trading plan. This plan will serve as a guide in every trading activity, ensuring that traders stay on the path they have set.
Key Components of a Trading Plan
Curtis M. Faith, a member of the Turtle Trader group, emphasizes the importance of trading planning in his book "Way of the Turtle." He breaks down a trading plan into six main components:
- Market: The instruments to be traded.
- Position Size: The size of the lots to be transacted.
- Entry Point: The right time to open a buy or sell position.
- Stop Point: The right time to exit a losing position.
- Exit Point: The right time to exit a profitable position.
- Trading System: The methods or strategies to be used in trading.
Consistency and Evaluation
Consistency in executing the initial plan and periodic evaluation of trading activities are crucial to achieving optimal profits. By following a well-prepared and consistent trading plan, traders can avoid unnecessary losses and increase their chances of success in trading.
.jpg)
.png)
.jpg)
.png)
