According to many traders, a trading plan is optional for successful trading. It is even more surprising when the same applies to the trading strategy. Below we will talk about how a trading plan can simplify trading and make it more efficient and less risky. So what are the benefits of a trading plan?
If you have a plan, then you will coordinate all your actions in the market with it, which means that you do not waste time. A planned trader is more likely to succeed as he moves towards achieving certain goals.
A plan allows you to focus on goals
In trading, there is no boss who will tell you what to do at one time or another; you have to control everything yourself. In such conditions, it is very easy to get distracted from the main thing and start doing the secondary. A trading plan allows you to keep focus on your main goals and move forward progressively. It is very important to clearly articulate your goals, preferably in writing. For example, “I want the percentage of winning trades to reach 80%.” It is important to single out major and minor goals in order to understand what to focus on first.
A plan allows you to track progress and keep you motivated
Nothing stimulates better than your own progress. But one thing is progress that is difficult to track, and another is progress represented by graphs and report tables. In terms of trade, be sure to highlight your goals and progress. This will keep you motivated to trade, especially during a difficult drawdown period.
The plan allows you to free up time and get rid of routine work
It has long been noted that a person following a schedule does much more than someone who does not. Having a trading plan allows you to set aside a certain time for trading on exchanges, thereby freeing up space for other activities and hobbies. After completing all the points of your plan on the list, you are getting closer to your goal without wasting time on unnecessary work and thought.
Thus, a trading plan allows you to stay motivated, achieve goals, free up time for other things and clearly plan your actions. But most importantly, it makes it possible to remain calm and transforms trading from the category of nervous activities into calm and pleasant ones. And what could be better than a pleasant activity that brings you money?
How to create a trading plan?
The trading plan is a very creative element of the trade. It is unlikely that you can find any specific template that will suit all traders without exception.
To create your first trading plan, answer a few simple questions by writing down your answers. Here they are:
- What time do I usually trade and what actions do I take?
- What are my goals? What do I want to achieve with trading?
- What is preventing my discipline? What routine would I like to get rid of?
- How do I behave when I lose motivation?
Now you can better understand what you are missing and what should be changed. A trading plan is like a magic wand to help you become a real market guru. By regularly evaluating your actions, discovering the pros and cons, you can achieve a better version of yourself as a trader. And the growth of indicators will fuel your motivation along with the size of the deposit.
Sometimes to the main points of the plan, you can add additional, but no less important.
- How to behave in case of force majeure;
- In what emotional state you are not trading;
- Profit and loss limits;
- Criteria for choosing a particular strategy (if there are several of them) depending on market conditions;
- What sources of information should be used.
As your experience grows, your trading plan can be expanded and improved. Do you want to become a successful trader? Start with a trading plan!