Having a trading plan is of great importance, yet it is not always an easy task for new traders. Sometimes they try their luck without having one, but this is not the best idea. It is like shooting blindly in the dark.
I have made the research and discovered that there are some trading plans available online. They do talk about the amounts of money you should put into the trade. However, they do not include other major factors.
This ultimate guide was created to teach you all about your trading plan.
What features your trading plan should cover?
The length of using the plan
The very basic thing is to decide how long you will use the trading plan. You can design it for a day, or a week, or even a month. What I usually do, is making a plan for one week. During this time I examine and evaluate its performance. If everything works how I wanted, I will use the same plan for about one month.
All the time I am using a particular trading plan, I keep records of all my trades. It will help me in the future to recognize what worked well and what did not. There is a special feature on the Olymp Trade platform showing a trading history that is particularly useful for this purpose.
A large number of trading strategies exist. But you should focus on one strategy for one trading plan. Your strategy can be based on classic technical analyses (let’s say you will focus on recognizing triangle and head and shoulders patterns.) Or you can use some candlestick formations and combine them with one of the technical indicators such as RSI. Whatever strategy you choose you to need to follow the rules established at the beginning to see how it is performing.
Trading instruments and markets
Another thing you need to define is which instruments and markets you want to trade. On Olymp Trade you can choose to trade financial derivatives or CFDs. There are also numerous markets such as stocks, currency pairs, indices, commodities, precious metals, cryptocurrencies, and so on. It will be easier for you to keep control over your performance if you maintain one type of instrument in one market.
Once you have established that, you have to decide on the time when to trade. The time zone and your trading strategy will have a great influence on that matter.
Here we need to discuss three main aspects.
Firstly, the account balance. This is the amount of money you will deposit during the term of your trading plan. After making a deposit, you simply use that money to increase their quantity. However, if your account balance is exhausted, it is not advisable to deposit further funds, unless you have formulated a new efficient plan.
Secondly, the amount of money you are ready to invest in the trade. You can, for example, set a fixed sum, e.g. $20 per trade. You can also use only money earned before as your trading profit. If you choose the second, you might be soon able to return the initial investment to the account balance.
Lastly, a profit target. You should determine your goals. Only then you will be able to estimate the money you want to get from a single trade and how many trades you will need to perform to reach your target. Of course, your profit target for a single transaction, and for a period of time should be reliable. This means that your expectations should follow the past performance of your strategy.
How to react when things do not go in the line with assumptions.
Not everything goes perfect. Occasionally you will get to your goal faster than you planned. On the contrary, you may also experience some unexpected losses and drain your account balance.
What to do then? To trade further or to stop at that point? You have to make your own decision. Just make sure you think it through. Protect your money so you don’t lose everything trading on Olymp Trade.
Take your emotions into account. Don’t let them overshadow your judgment. Is recovering losses the only reason for increasing your trade amount? Or is it the decision taken with a cool mind?
Now you know how your trading plan should look like. Remember, it is very important to create one, even if you are not sure if it is good. You will learn on the way and your plans will get better and better. Never start trading without a plan because this could cost you severe losses.
Would you like to add something or share your experiences? Like, comment and share!
Enjoy high payouts!
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