Planning and Strategizing a Trading Plan
A trading plan consists of a set of rules and conditions that reflects on your trading style. It defines your goals, objectives, risk and money management, strategies and so on. It is of great assistance to your overall trading strategies.
Seasoned traders always have at least a trading plan as it is a useful tool that gives them an advantage. Traders who have a plan generally perform better than those who do not have one.
Importance of a Trading Plan
If you have a trading plan, you are able to monitor your trading performance closely. Each day, you can evaluate your progress continually and objectively.
Although the trading plan does not guarantee success in trading, it would definitely minimize losses and even optimize profits which you will not otherwise achieve without a plan.
Many amateur traders, even the more experienced ones make the mistake of not having planned. As a result, they exit the game much faster than those who have one.
The trading plan will first help you to stay focus psychologically on your trading goals and targets. It will also help limit your losses by restricting your chance or probability to trade due to the conditions you have first set in your plan. Most importantly, having a trading plan in place will be able to minimize the effect of emotional issues during trading.
Trading plan helps you know when your overall trades are not profitable. It is either your plan is not working or you are not sticking to your plan. You should be going through your trading plan every single day; strategize according to the type of trader you are and the common approaches you take.
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