DEFINITION of trading plan
The trading plan is a strategy set by the individual trader in order to systemize the evaluation of assets, risk management, types of trading, and objective setting.
WHAT IT IS IN ESSENCE
A trading plan is a set of rules and guidelines that shape and define your trading behavior. Including but not limited to financial goals, money management rules, risk management techniques and criteria for opening and closing positions.
Most trading plans comprise two parts: long-term trading objectives, and the way of achieving them.
Every trader has a personal one which is unique. The personal, reflects a trader’s risk appetite, preferred markets, and trading style. Making it means taking your short and long-term goals into account, as well as expertise and other factors.
A trading plan represents a systematic method for identifying and trading securities that take into consideration a number of variables including time, risk and the investor’s goals.
Traders and investors are looking for trading plans that will result in profit. Many of them may create it in such way that involves automated investing as part of savings strategies. Other may seek to develop a trading plan as part of an active investing approach that requires to capitalize on profitable market opportunities by making tactical trades.
HOW TO USE
Without a trading plan, you are just gambling in the markets. Hence, you have to learn how to make a trading plan and put the edge in your favor.
Before taking on an endeavor, it is wise to have a plan. A plan is crucial. When you are trading there are multiple reasons for having one. One of the best reasons for having a trading plan is it requires you to educate yourself about the market, acquiring knowledge on trading basics and strategies before you write it. Additionally, having it takes much of the emotion out of trading. You know exactly what to do, how, and when. You can’t get rid of your emotions entirely, but the plan helps you control them so they aren’t destructive.