Forming a Trading Plan
"Just because someone else has a trading method that works well and is successful because of it, doesn't mean that the same exact method can give you the same results."
Most of us are probably novice traders. So, it is very common if one of us imitates other traders or follows the trading ways of others who are considered more senior than you.
It's not wrong, but never follow other people's opinions absolutely. Every trader can have a different view of the market. Likewise, the way of thinking, risk tolerance, and targets are different.
Just because someone has a trading method that they can run well and successfully doesn't necessarily mean it's suitable for you. In other words, you may not be able to carry out this trading method well and successfully.
Have your own trading plan, which suits your character as a trader, and always update it in line with your experience studying the market.
said the wise man.
If you fail to plan, then you have already planned to fail. "
Building a trading plan and running it well is closely related to discipline. But discipline alone is not enough. You must have super-strict discipline.
Having super-strict discipline is the most important characteristic of a successful trader. You need super-tight discipline to run the trading plan you built earlier.
The trading plan itself is a guide to what you should do, why, when, and how you will do it. The trading plan covers your personality as a trader, personal goals, risk management, and the trading system that you will apply.
If you run a trading plan with super-strict discipline, then you will be able to minimize the mistakes that occur in trading, which by itself will minimize risk.
Your emotions will usually overwhelm you when your money is in danger. Often, people will make irrational decisions at times like that. A good trader should not make such irrational decisions.
A good trading plan (and super-strict discipline) will keep you from making bad decisions in difficult times. With a good trading plan, every decision that comes out has been carefully calculated, so you will avoid making rash decisions in difficult situations.
All you need to do is stick to the original plan, namely the trading plan. There is a sentence in English that can easily describe it, "Stick to the plan!"
1. Why do you need a trading plan?
It was mentioned earlier that a trading plan will protect you from making rash decisions. In addition, a trading plan will make your trading simpler than if you did not have a trading plan at all.
Have you ever used the Google Navigation facility that works like a GPS?
With Google Navigation, you will be guided if you want to travel somewhere you didn't know before. You just enter your current location and enter your destination location.
Then Google Navigation will provide the best route and directions to get to your destination. You will be given instructions on which route to take, for example, "... in one hundred meters, turn left... continue straight...." etc.
You just follow it so you can minimize the risk of getting lost.
Your trading plan works similarly to those routes and directions. It will show you where you are now and help you to achieve your goal as a trader, which is consistent profit.
Trading without a trading plan is almost as bad as traveling without knowing the direction and location of the destination. Your goal in trading is to make consistent profits, but it is nonsense if you don't know how to achieve that goal.
As a result, instead of making consistent profits, you consistently destroy your trading account. With a trading plan, you will know what to do. You'll also know right away if you're going in the wrong direction.
You will have a standard against which to measure your trading performance. You will also always know what to do if you turn out to be "the wrong way". A trading plan will also help reduce the potential for stress and emotion in trading.
You can trade without a trading plan, but your trading style will be haphazard. Buy and sell only based on instinct or unclear signals. That's not trading. It's the same with gambling.
Having a trading plan is not an absolute guarantee that you will be successful. But at the very least, by having a trading plan, you will be able to evaluate what went wrong with your trades if you fail.
In reality, failure in trading is caused by not having a trading plan or not executing a trading plan properly.
This is a fact. The majority of novice traders do not have a trading plan. Through this program, you will try to be one of the few who can actually survive in the trading world.
2. Get to know your personality.
The first step needed to build a trading plan is to recognize your own character. The basis of your trading plan is your own character because you are the one who will execute it. By knowing your personal character, then you will know what kind of trader you are.
This is called a trader profile. If you already know your profile as a trader, you will be able to find out what trading method suits your character.
Strategies, systems, or methods that don't match your character will actually reduce your chances of success.
3. Set goals.
Set your goals as a trader. It would be best if you also had a certain motivation that could spur enthusiasm and strengthen your commitment.
A person will not be successful as a trader if he does not have a serious commitment. It will be quickly crushed by the market. Remember that your goal in trading is, of course, to earn consistent profits.
If your goal of trading is just to have fun testing your guts, then that goal will not work together with the goal of achieving that consistent profit.
At certain times, you may enjoy stressful times when your transactions are swayed by the market. But believe me, you will find it difficult to show that happy face when your account sinks in the market.
If it's really fun testing your guts that you're looking for, feel free to do some "recreation" like bungee jumping or skydiving instead of trading.
4. Set targets.
We recommend that you set your profit target with explicit and specific numbers. For example, $100 per day, $1,000 per month, 20% per month, 50% per month, and so on.
Clear targets, in turn, will help you determine the strategy you will implement. You will also be able to evaluate the progress of your trading, whether it is improving or not.
5. Capital at Risk
The world of trading is a harsh world. Loss after loss may just hit you. That's why you need to set a risk limit. The term is "risk capital."
Risk capital is an amount of money that even if you "lose", you will still feel fine. If in the course of trading you experience a loss, then this risk capital will be the first to leave your account.
Even if the money is lost, you will not lose your house, and your family will be fine. Thus, the amount of risk capital must be in accordance with your abilities.
Therefore, do not trade with money that would otherwise be used to pay bills or finance daily needs. Imagine if the money disappeared because your trading was losing money. You might not eat later.
6. Develop a strategy
This strategy is related to risk management, money management, and trading systems. In the previous chapter, you learned about this trading system.
Well, in the next chapter you will learn money management and risk management so that your trading system can run in balance with the strength of your capital.
For example, in a trading strategy, the amount of funds used for each transaction is determined, as is the amount of risk for each transaction, the target to be achieved, and what trading signals are used.
Example of a forex trading plan
A Forex Trading Strategy
How to create a trading plan
Forex trading plan example
Forex Trading Plan ExampleBuy EURUSD at 1.14WHY ?Price is above yesterday high and price is above EMA200 on daily chart and Industrial report yesterday was bad for US economy (Industrial Production MoM is - 11%)When to close ?Close at 1.152 because it is monthly high
How do you create a forex trading strategy?
Forex Strategy Goal:
When should I say good-by?
Forex Trading Strategy
Forex plan rules example
So, in your forex trading plan, you can create your own format; you must explain your thoughts on your beliefs.
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