MAIN ELEMENTS OF YOUR TRADING PLAN | Trading Basics 📝
One month ago I wrote an article about the importance of a trading plan. Now it is time to discuss what should be inside your trading plan.
Before we start let me note that a trading plan is a very personal thing and depending on your personality you may have some other elements. In this article, we discuss key elements that must be in every trading plan.
I want you to realize that a trading strategy is not a trading plan. A trading strategy is simply one of its main elements.
A trading strategy defines a set of rules and market conditions that one is looking for to open a trade and then manage that.
Relying on your trading strategy you should know exactly when you trade. The time range must be precise and fixed. If you think that today you can trade the opening of the London session, tomorrow the Asian one, and then the US opening, I have very bad news for you.
Your trading hours must be fixed and objective.
As with your trading time, you should have a fixed trading list. A set of financial instruments that you monitor on a daily basis.
You should learn to journal your trades. Just a single performance is not enough. You should note the exact market conditions that made you open the trade and many other factors that you consider to be important.
Then learn from your mistakes and improve your trading strategy based on your journal.
Having the best trading strategy in the world one can fail simply because of neglecting the rules of risk management.
Define your risk per trade, maximum drawdown, and biggest losing streak you can take.
Optimize your trading to keep your losses under control.
Of course, that list can be extended. We can add, for example, trading psychology into that.
As I said, a trading plan is a very personal thing and while you mature in trading it will become more and more sophisticated.
The elements that we discussed in this article are crucial for your success in trading. In my view, their absence will lead you to a failure.
What do you want to learn in the next article?