Prior to becoming successful in trading I had to learn about creating a solid trading plan. This did not seem very important at the time. I did not see the benefit at all.
However, every good trader I spoke to or came across would always mention a trading plan or a trading journal.
WHY IS A TRADING PLAN IMPORTANT?
Trading is just like any other business but with better benefits. For any new venture you decide to get into, you should always have a solid plan.
You need a solid plan or a blueprint so you can avoid major mistakes. There are 4 main reasons why I have a trade plan.
- Knowing why I am entering a trade
Before you enter a trade, do you ever ask yourself why do I like this trade? Why is this a good entry for me?
I do! I make sure I do my analysis and write down or type lol what pattern I see and if it is it in supply or demand.
- What are the Economic News for that particular pair?
Having a trade plan will encourage you to look at the economic news coming up for the week. Fundamentals are as important as technical analysis. You have to keep in mind that both play a part on the psychology of the market.
- Knowing your exit
This is by far one of the most important things. Knowing when to exit will make you money and also it will make you happy, unless of course you are greedy!
When you do write down your entry you of course need an exit strategy. AN exit strategy is your TARGET and your STOP LOSS.
Many of my students know I am not a big fan of stop losses however; in particular trades I will use them. If I feel like the trade is HIGH RISK (meaning major economic news) then I will place a stop loss! Not a small stop though!
If you enter a trade and you don’t know where your exit will be you will most likely make mistakes and either exit the trade to early or let the trade go against you for way to long.
- What is the duration of your trade?
This is also important. How long do you plan on being in this trade? Is is a swing trade or a day trade?
Most of my trades are swing trades so my duration could be anywhere from a day to a month and so on.
I do take day trades sometimes and when I do the duration is based on the time frame the trade was found on.
So if I found my entry in the 4hr chart that is how long I will be in that trade.
For all the new beginners make sure you create a trade plan you can also email me for an example at Bellaweb88@gmail.com.
Happy Trading Everyone!