Having a trading plan is a must for every trader. Without it,
you would be close to trading blindly. It’s never helpful to have tunnel-vision
when it comes to trading. You would be fixated in one thing, which is not near
good enough for trading.
Of course, many things are easier said than done. Many traders
know the importance of having good trading plan, but they don’t know how to do
it right.
Now here are some of the best practical tips that you could
use for your trading plan.
Develop your own trader identity
This simply means that you should be your own trader and you
shouldn’t just follow another trader’s trading plan.
Sure, one trading plan works for one trader—but you are not
entirely him or her. You have differences for sure, since no two traders are
alike. So before you adapt a trading plan, it’s better to give developing your
own trading plan a shot.
Consider your own circumstances and outlook, as well as risk tolerance, market views, thought processes, and market experience.
Start developing your trading plan right away and see if you
can make some adjustments to make it better.
Have some trading discipline
It’s not enough that you have your very own, personalized
trading plan. What’s more important is that you stick to that plan and have the
discipline to stick to it no matter how tempting it is deviate from it due to extreme
fear or greed.
And when we say trading discipline, we mean solid
discipline. The market will definitely throw a lot of things at you:
distracting, disruptive, and frustrating things. Such stuff will make you think
your trading plan is useless. Some of them, conversely, will make you think you
can deviate from the plan just because of temporary disproportionate gains.
Overall, you just have to keep from being Star Lord and
stick to the plan if you don’t want half of your trading capital wiped out in a
snap—or worse, all of it.
Get a hold of yourself and control your
emotions
As indicated above, you shouldn’t let your emotions get the
best of you. Trading isn’t a strict science, but it requires strong control of
urges and emotions.
When you make a trading plan, you should consider your
emotions and add them to equation. Remember that your risk tolerance is also another
crucial point to consider. If you take on more risks than you can actually
tolerate, you’re bound to be crippled by emotions.
Make your trading plan very streamlined and explore all
avenues. Prepare yourself for different scenarios so that when you finally come
to them face to face, you’re sure of what to do.
Resist the urge to throw your trading plan out of the window
no matter how afraid you are. This is true for all markets, whether you are
trading currencies, stocks, commodities, real estate, options, futures, et
cetera.
Read further: Picking Stocks: 4 Things to Consider
Conclusion
Remember that a good trading plan is like a map that gives
you directions. A good trading plan helps you know what you can do in dire
circumstances ahead of time. So never forgo coming up with your trading plan. Remember
that it’s a must for every trader who wants to be successful.
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