All successful businesses have a business plan that they stick to in good and bad times. Many businesses that fail have something in common. They failed to follow their plan during rough times. All successful companies have a business plan that has been strictly followed all the time whether it be in boom times or during bust times. The same applies to trading also.
Trading, whether it be day or swing is no different than any other business out there. It is a business and like all successful businesses out there it must have a plan. That is why we find that all successful day or swing traders have a trading plan and system that they follow in their day to day trading activities. They make a trading plan and then they trade it religiously. So what exactly are some of the ingredients of a successful trader's trading plan?
First of all the trader has to settle down on a pattern or two to focus on. There is no point in trying to learn hundreds of chart patterns out there available to a trader. Just focus on one or two and get very good at them by being consistently profitable. Secondly the trader must choose his or her market to trade very carefully. There are many, many markets available out there to trade. A trader must pick one or two out that fits his or her personality.
Thirdly a trader must decide on the amount of capital they are willing to risk in any market. They must be willing to lose that sum of money without it affecting their lifestyle. They must decide on the maximum amount they are willing to lose, also called a drawdown in the trading business, before they quit trading. Fourth on the plan should be a detailed explanation of how a trader will be entering, managing and exiting the trades taken as per their plan. Exits are far more important than the entries as that is where the amount of money made or lost is decided. A daily loss limit to stop trading is a good thing to include also.
Next on the list should be goals that a trader must set for himself or herself. They can be in the form of daily, weekly and monthly goals. This is where a trader can decide to stop trading for the day, week or month if their goal has been met. The trader has to journal each and every trade he or she takes so that it will help them evaluate their performance. They must also include in their plans the days that they will NOT trade. This is very important as trading is all a mental game and it is very important for a trader to be in top mental shape and form.
Any distractions to a trader's mind in the form of things like a fight with a spouse, divorce, unpaid and mounting bills, bad health and so on are enemies of the mind and should be avoided at all costs by a trader on trading days. Traders must also include plans to train on their market after the regular close. This way they keep themselves mentally prepared at all times. They can also include plans on when it is OK to reward themselves and in what way or when they can or must take time off to cool off mentally.
These are a few of the very important things to be included in a trader's trading plan. A trader will put himself or herself ahead of most of the traders out there this way as most of those who fail never had a plan to begin with. A trader must keep this plan on the desk that they use for trading and follow it religiously. The Trading Plan should be like a Holy Bible for the trader. They can add more items to the plan as they go along and just make sure that they follow their plan at all times, good or bad.
Please visit http://www.invictatrader.com to learn more about the Watts Trading System from Ryan Watts of the Watts Trading Group and how it can be used to profitably swing or day trade stocks, futures, forex or any other liquid market and any time frame. It is the only system out there that we believe offers a lot to traders who want to succeed at trading for such a low price.
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