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What Is A Trading Plan?

dtc 24 August, 2007 16:49 Educational Materials, Trading Notes, Trading Plan Permalink Trackbacks (0)

I thought putting together a trading plan would be an easy job but I was so wrong!  After all the readings I have done surrounding the subject in the past few days, I soon realize that creating a trading plan is not a trivial task! 

For anyone who is serious of becoming a professional trader or even just a good one, then a good trading plan is a must have.

What is a trading plan?  Simple put, a trading plan is a complete set of rules that covers every aspect of one’s trading life and it’s what all pros have and amateurs have not!  Many professional traders refer to the need to have an ‘edge’ which will tip the balance of probabilities of success in the favorer of the ones who has a trading plan.  A trading plan is not a trading strategy. It is objective and comprehensive.  Think of this way, trading is a business; a trading plan is a business plan.  And as any business plan, it evolves and changes, and should improve over time.

What will a trading plan do?  The trading plan is your personal GPS system in the world of trading; it will give you your current market position, help you to correct your direction, tell you where you are in terms of your objectives and help you to chart your course thru the trading risk.

So, are you ready to develop an edge?   Well, the lucky speculator is read to do it…

remember this?... “luck is what happens when preparation meets opportunity” - Seneca

Well… let’s get start then...

Now I know a good trading plan matters so I am not going to treat a development of a good trading plan lightly, I googled web for a good plan template and I found myself a very good template from trade2win (T2W) web side (http://www.trade2win.com/knowledge/articles/general_articles/trading-plan-template/). 

The template has 11 sections and each section requires some deep thoughts. So, I plan to do one section at a time and you shall read about them in the next few days. 

Sections list:

  1. know yourself, know your purpose
  2. trading goals
  3. markets, instruments & timeframes
  4. tools of the trade
  5. before the market opens…
  6. risk & money management
  7. exit strategy
  8. trade strategies, setups & entries
  9. after the market closes…
  10. discipline!

And, while waiting to read mine, maybe you should start doing yours as well.  Like I said, a trading plan, all pros have and amateurs have not, are you a pro or a amateur?   

 

 



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