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Trading Plan - A must in the Trader’s Arsenal

Razvan Mihai

Analyst

You have probably already heard that it is important for traders to set up a Trading Plan. This should be a must, in my opinion, for novice traders but also for those who have experience (but they know this by now).

One of the most important attributes of a Trading Plan is that it helps the trader to be disciplined. Discipline is a quality that cannot be taught that easily, but it can be learned in time. Another attribute would be that it keeps details that a human being at some point would forget. It also helps the trader to avoid the mistakes that he already did in the past, but also those that comes from negative emotions like greed and fear.

Trading Strategy

For a novice in this domain to get to have a strategy, he/she would first have to learn about the markets, to get to know the opportunities and to get to know the risks. When a trader found a working strategy or strategies he/she would then have to write every detail of the strategy in the Trading Plan, so that nothing to be forgot. This way the trader will always keep an eye on the trading strategy and will lower his probability to make unnecessarily and unforced mistakes.

Money Management

At least as important as a good strategy is a good Money Management. If you fully understand your trading strategy you can, then, adjust the money management so that you will get even more money from the market.

A good money management, adapted to each situation is one of the best weapons that traders have in their arsenal. You will find different types of Money Management in the trading books, but you cannot take them and apply without any changes. As well as for the trading system, each trader should consider adjusting their Money Management to their own personality.

Trading Schedule

It is important for a trader to set up a trading schedule. Taking into consideration the strategy that he/she has, the time that has at disposal for this activity. It is important to how much time to invest in reading the news, analyze the market, review your instruments and apply the strategy. If you do not allocate properly your time you might end up doing mistakes.

Trading Journal

Each Trading Plan should include also a Trading Journal. Writing the motives of your entries, the emotions that appeared during the trader, but also other details that could help in the future is very important in each trader’s evolution. With the help of the Trading Journal the trader can fine tune his strategy or adjust the money management and the emotion management to improve the results.

These are the main points to be discussed that can be included in the Trading Plan. Even though everybody knows about them, but there are few who use the full power of this weapon. 

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