- First, consider what your preferred time frame you want to trade. This ultimately comes down to work commitments and personal preferences.
- Second, do you want to trade in the direction of the trend aka trend following strategy or do you want to be a counter trend trader and trade reversal patterns?
- Third, you’ll need something to look for as a signal to enter. You can use price action, support and resistance, indicators or a combination of these.
- Forth, you should consider a risk management strategy and your position size per trade. When you’re first starting and learning a new trading system trade much lower as like 1%
- These are some of the essential components of a professional trading plan:
This part is really crucial because you need to have sort of a vision or sort of a plan for what you want to accomplish through trading.
It’s good to trade for money as this is one of the things that attract people to trading in the first place. But you need to really have a much greater motivation because this is what’s going to keep you moving forward whenever you have a bad time in trading.
You need a basic reason why you should stick to trading and why you need to keep going and trust the process over time.
2nd-Preferred Instruments to Trade
3rd-Trade Execution
The trade execution process comes down to what is your trading setup.
How do you base your decision to enter the market?
How do you base your decision to exit the market?
How do you base your decision to protect your trade if the market goes against you?
4th-Money Management
5th-Keeping Track of your Trades
Keep up a detailed record of your trading activities!
Obviously, you will need to journal more than just your profitable trades and the losing trades.
You have to record all the reasons that lead you to take the trade so you make sure you’re following your trading process.
But, you also have to keep track of your frame of mind and mindset.
What did you do well this past week?
What were your strengths and weakness?
Where were your mistakes made?
Answering these questions and keeping a detailed record will give you an opportunity for you to go back and review your trades and keep a detailed history of your trading activities.
When you write these things down it will help you remember the important stuff that leads you to make successful trades. And when you can identify the variables that helped you to make profitable trades you can repeat the same trading process over and over until you gain financial freedom.
The best plan trading strategy is not a big plan with thousands of pages that you have to go through. What you need to understand is that the best trading plan strategy needs to be effective, it has to be short and simple and you had to have it on your desk.