Creating a sound trading plan is essential for any trader who wants to be successful. Establishing and adhering to such a plan will pay long-term dividends, as it will help traders define their goals, minimize risk, and manage their emotions while trading.
A successful trading plan should be highly detailed and should include risk management strategies, such as a stop loss policy and maximum daily loss limit. It should also include the specific markets, trading instruments, and strategies to be employed. Other key components of a trading plan include the techniques employed to enter and exit trades, but also even the size of each position.
Aside from the technical aspects of a trading plan, the psychological impacts of trading are equally important to consider. The most important psychological factor to include in a trading plan is discipline. Discipline is essential to success in trading, and it must be trained just like any other skill. Traders must be disciplined enough to stick to their trading plans, even when the market may be going against them.
Another important psychological factor to consider is one’s attitude towards risk. This means understanding the risks of trading and having the psychological knack for taking calculated risks with one’s money. For example, a trader may have a plan to only risk 5% of their capital on any given trade and must have the psychological strength to stick to it even if the trade appears promising.
Finally, a trading plan must also consider the level of emotional attachment a trader has to their trades. This means having the psychological tenacity to accept the losses that occur as a part of trading. Traders must also have the emotional fortitude to accept the fact that they are not in control of the market, and no emotion should be brought to the trading table.
In conclusion, creating and adhering to a successful trading plan is essential to any trader’s success. When creating a plan, technical components such as risk management strategies, entry and exit techniques, and position sizing, must be considered. It’s also important to factor in psychological aspects such as discipline, attitude toward risk, and attachment to trades. When done correctly, having the right trading plan can have a major impact on a trader’s success.
If you need help with your trading plan or any other aspect of day trading, consider joining my group “Coaching With Cliff” here at Live Traders. Why struggle on your own when you can work with 70 like minded traders?
More information about the group can be found at the following link: https://livetraders.com/groups/detail/2b144965-1248-4117-a8e0-be3f70c5725d
