In creating a perfect trading plan we must know why we are creating the plan. In the market, there are many sources available with the help of them you can become a trader. But you must have some knowledge about those how to use all of them.
Before executing anything we need to do paperwork. It’s Mean before jumping into the trading then we must do the paperwork. The paperwork is essential for trading if you don’t do the paperwork then your winning probabilities will reduce.
While preparing the trading plan mostly we focus on our risk tolerance, financial goals, wealth creation, and market conditions. Making the plan for trading is called prediction about the situation of the market, and preparing for the next move of the market.
Here I’m providing some important elements for creating a good trading plan and it’s more and more important to every trader.
In the trading plan, you must know about your vision and how you work on it. You can also create a trading plan for the analysis of the market, trading, and every activity you do in the market.
Table of Contents
Your motivation for your trading
This is the main part of developing a trading plan in the market. Why do you trade you must know it before your trading plan. Many of the traders land in the stock market to earn money and many traders for wealth creation.
it depends on how you motivate yourself to trade. I love to do trading it’s my profession in the stock market. Same as what is your motive in the stock market. Ask yourself while preparing the trading plan.
We know as well as every trader has their motto in the stock market. And decide what you want to achieve with the help of the trading. Because we know very well that trading is not a cup of tea it’s very hard to do.
Trading plan you must have a time Commitment
Before creating a trading plan you must have time bond dating. You must set the target with a time commitment. If you don’t have time expiration then you will not work well.
It helps to achieve our target in the market because whenever the time has run out you will work hard too fast. Because time has important in the trading plan. Assume you have decided your time for around one year then you will be bound and you start working to achieving your target.
The stock market is an important part of our life ask yourself how much time you have and how much time to waste hustling here and there. By measurement of this, you will be aware of how to use the proper time in the stock market,
Available capital for trading
It’s a very important part and gives the most impact on trading. The spouse you have around 10k USD in your trading account then you are most to do trading with it. You can easily manage your trading position while trading.
Now the point has come, you have 12k capital for the trading. How are you manage it and what is your strategy to take trade by using your trading capital in the market?
It’s not important to you to have a huge amount for trading in the market and making the trading plan here. Many traders have thought about the trading trader requiring too much capital but it’s not looking like that.
Here the question is how much capital you have while preparing the trading plan. if you have 1k USD for trading that is enough but you need to create a plan with your suitable capital.
Your trading goals
How you will achieve your goal. What action you have taken till now to achieve your achievement? Every question has arisen now.
The answers are all of these questions you must have an archivable trading goal in the market. If you want to become a pro trader in the market then how you are working for it? If you want to earn more money then how much effort are you giving this thing is compulsory in the market.
Do you know I have a trading goal in the market I want to become a mentor with help of the trading? I have some bit of knowledge about trading and still, I’m following only one strategy in the market. So that’s why I have a good command of trading.
As you have prepared a trading plan then in the plan you should set your trading plan.
Risk Management Strategy
Risk management is the key to success in the market. If you are not focusing on your risk management then maybe you will wipe out your trading account soon. While creating your trading plan you must add the risk management strategy to your plan.
Risk management helps to teach you how much you are ready to lose and how much you will get back from the market. Risk is the main part of everything you must consider about your risk If you are not concentrating on your risk reward then the result you know well.
Occasionally, we have seen many traders who don’t know what is risk-reward management and how to prepare for it. I want to tell all of them about the organization of managing and identifying the objects that can affect your objectives. Here I’m giving some important ideas to help them you might make your effective risk management strategy.
- Risk Identification
- Risk assessments
- Risk mitigation
- Risk monitoring
- Risk Communication
- Risk documentation
- Risk Response
- Regular review and improvement
What markets do you trade?
In the trading career, you should be aware of the market in which market would you like to trade. Here are around four types of market
Type of the market
- Forex Market
- Stock market
- Crypto market
- cash market
If those types of the market must be in your trading plan. If you don’t have then you must know what market do love to trade in.
Those markets are the most popular in the entire world and most traders are trading in these markets. It is the main role to pay if you don’t decide your trading area then how do you do the trading in your carrier?
Trading system
Many traders have not been aware of the trading system. They are confused about which one is the setup of the trading system. In other words, trading is a trader following the systematic thing to decide to make buying or selling of financial activities such as stock, currency, bonds, etc.
It is the process with the help of traders put their trade on their analysis and interpretation of the market condition.
Here some informative points are to consider for a good trading system.
- Trading strategy
- Risk management
- Technical analysis
- Fundamental analysis
- Backtesting
- Optimization
- Execution and order management
- Discipline
These are important components of creating an effective trading plan. I know these are not enough to make the trading plan but if you know that thing you will be a good trader soon.
Keeping a trading journal
Now the points come to know how to keep the trading journal in the market. In the market, some traders have succeeded because they follow their proper trading setups they maintain their training journey while trading.
Here I’m sharing some information about how to keep a trading journal. Mostly I maintain two types of journals in the market. 1st is trade history and the second one is the book, in this mainly I write while trading what I was feeling on the execution of the trade.
Why it’s important to keep it because the trading journal helps to find out the mistakes and rectify them. This is our footstep and we can reach our mistakes with the help of our footsteps.