Trading on Financial Markets | Your Guide to Trade Planning 📝
Updated: Jun 13
In this post, we will discuss 6 crucial things in your trade planning and the main elements of trade results assessment.
1️⃣ - Before you open a trading position, make sure that you analyzed the chart. You should identify a market trend and spot major key levels.
Here on WTI Crude Oil I have analyzed key levels and came to the conclusion that the market is trading in sideways.
2️⃣ - Once the chart is analyzed, you should identify the safest trading areas for your strategy (preferably the zones of supply and demand).
You should patiently wait until one of these zones is tested.
Back to our example. The support that the market is approaching is a safe area to buy from.
3️⃣ - Once the zone is reached, you should look for a confirmation. You can either look for a reversal candlestick/price action pattern, some fundamental trigger, or some indicator. The point is that you should rely on a trigger that is backtested and that proved its accuracy.
In our example, the confirmation pattern - the ascending triangle is spotted on lower time frames.
4️⃣ - Getting your confirmation, you should have a precise entry strategy. Some traders prefer aggressive entries on spot while others are waiting for a retest of some major/minor level.
Trading Oil, the perfect entry point will be on a retest of a broken neckline of a triangle.
5️⃣ - You must set a stop loss. Remember that your stop-loss defines the point where you become wrong in your predictions. Be extremely careful on that step and give the market some space for fluctuations.
Back to our example - our safe stop loss will be below the lows.
6️⃣ - Know your exact target level(s). Know the point where you start protection of your position, where you start profit-taking. Be very strict and don't let your greed and fear intervene.
Returning to our trade, the Perfect target level is based on a closes strong resistance.
Only then a trading position is opened.
No matter what will be the end result of your trade, you should assess it:
1️⃣- You should journal the trade outlining its end result, trading instrument, and your entry reason.
2️⃣ - Note any peculiar thing about this trade that you noticed.
3️⃣ - Record your gain/loss percentage.
4️⃣ - Identify whether any mistake was made and if so, learn from that.
Here is your minimum plan to follow. Of course, as you mature in trading your trade assessment plan will be more sophisticated.
Do not underestimate its importance and treat it as the main element of your trading routine.