Have you ever felt like going around without a map? What does it feel like? It must not feel very pleasing as you might not know what the best route is to reach your destination. Even if you have an idea about that, you will have a hard time finding all the roads and tracks. But it gets a lot easier when you have a map. That map can be of your own devising or one that was previously drawn by someone else. But as long as it helps you reach your destination; you can say that it is an effective one.
Now, as an investor, your main motive is to earn profit without making losses. So, let’s say, making a profit is your destination. In the trading industry, your map to reach your desired destination is your trading plan. This trading plan is just like a map that will help you to locate all the important points that you will need to accomplish before executing a trade.
Executions of the trade
Trading execution is a rather simple task where you might just have to click a button or two. Then, what is the most difficult part of trading is the trade preparation. You have to work really hard to organizing things before you get to trade your capital. You will have to secure some investment and do some market analysis to understand the best execution level. You will have to look at the charts or draw the trendlines. Look for market breakouts and distinguish them from the fake outs. You might also have to look for the indicators for a better price deal. The worklist can go on and on and on. So, it is natural to feel lost at some point and be overwhelmed by looking at the amount of work. But you can easily organize all the work with a trading plan.
For example, you might have a CFD trading plan with which you will be analyzing the charts first and draw trend lines based on them. Then, you will try to find out the risks if you put your investment in this deal. After finding out the risks, you can adopt some risk managing strategies like a risk to reward ratios or stop-loss from any loss. Then you can occasionally check up on the economic indicators to see if there’s any possibility for any sudden price change. After that, you can re-evaluate your previous trades to find out your strengths and weaknesses and work on them accordingly. Only after that, can you safely execute your trade.
How to make a trading plan?
Now as you have already understood that making a plan can be of great help, here are some tips to help you to build one. But you need to make sure that no matter what plan you adopt, it needs to fit your trading style and skill level to produce the best performance.
- List out all your trading works and make sure that you are not leaving any one of them.
- Try to place all your works according to your priorities. Your plan should have space for only the necessary works. Cancel out all the unnecessary tasks that may cause a hindrance to your trade.
- Make a blueprint and check if any task overlaps with another or not. In case, one task overlaps, try to shift it to another flexible time for the best performance.
- Try out your trading plan and check whether it is effective or not. You can also compare it with the plan of other traders to identify the shortcomings of your trading plan. If you notice any loophole, then reconstruct again it to solve the problem.
It is true that you can never have a hundred percent flawless trading plan. Your plan might have problems but it is completely up to you how you deal with them. Depending on how well you do that, you will be getting either favorable or unfavorable results.
