TRADING PLAN TIPS

Anything we want to succeed doing needs a plan. There must always be a plan of attack if we want to achieve something, because playing things by ear usually doesn’t resolve anything – at all.

Markets are too dynamic. There’s a huge amount of uncertainty out there and you won’t see the next sunlight if you just try to navigate blindly through these uncertainties. Trading plans are necessary if you really want to make serious money consistently.

Analytical Approach

This is pretty straightforward. You should know what you see when you identify set-ups. What you use doesn’t really matter so much. It should just make sense and is used consistently. It could be some combination of price support and resistance, trend lines, slope analysis, chart patterns, Fibonacci levels, moving average, Ichimoku clouds, Elliot Wave Principle, sentiment, fundamentals, etc.

Trade Set-Ups

What set-ups work best for you, or get you excited, should be at the center of your trading. Set-ups are based on the alignment or confluence of any number of factors that strengthens the conviction of a trading opportunity. If you are quite a newbie to trading, then this will take some time to figure out, so you should be patient in making progress towards understanding what works best for you.

A set-up is one thing, but the way you execute it is another. To review the key point, there is your set-up, and then the method by which you will take advantage of that set-up. For instance, three traders determined the same trading set-up and therefore the same trading opportunity, but they will have a different plan of attack, so to speak, from each other.

One may choose to buy at the breakout, while the other may wait for the first pullback after the breakout, and the third one will some combination of the first two.

Markets to Focus On

Not every market is the same and not every trader has the same interest in trading in the same market. That’s why you should always know the market in which you want to focus on. It’s a good idea to keep your real relatively small because it helps keep things simple and lets you learn the personalities of the target markets and/or currencies.

You can then take it a step further and focus on specific time-frames for every market category. For instance, you can trade equities or indexes on a very short time horizon, but you may also choose to trade forex as a swing trader for several days to several weeks.

Risk Management

Without good risk management none of your trading plan will work, at least not for long. That is why you certainly need to know your risk tolerance and find a risk management strategy that fits you and your tolerance.

You should know how much risk-per-trade you are taking and the total risk account across several of your positions. Have a max drawdown figure in place as “kill switch” when things aren’t going well.