Why you need a Trading plan

As a trader one may find it difficult to stick to rules and plans but these are ultimately serious. You can sit across one hundred traders today and they will confirm their ability to trade but they will not be able to strictly define the rules which they use to define a trading opportunity, what defines their loss or profit targets, and how many times a day they actually plan on trading. Today we will be talking about why a trading plan is important and how to set up one

Importance of a trading plan

A trading plan is a set of rules that use to define the market environment in which you will enter a buy or sale position. These rules help you define your edge in the market as well as define how much you are willing to lose so that you drastically increase the chances that you will not blow your account. This plan also defines your daily target so that you do not overtrade and over-risk your account. These trading rules allow you to keep a trading routine that will guarantee that you maximize your edge and minimize risk. The plan also reduces your emotions in trading as by sticking to rules you are able to remove the guesswork out of the picture and grow accustomed to your trading strategy.

Just spending an hour or two setting up your plan and just spending 30 minutes a day going over it before you trade can really hummer in the basics of your trading strategy and the confidence that your account funds will be protected. By shifting over to a trading plan you begin to treat your trading less like a hobby and more like an actual business

You also need to ensure that you keep track of the broker you use and the conditions which they offer when trading. In your trading plan you, want to take note of your daily trades the pips which you lose and gain. This can show you if the broker is skimming off your pips or adjusting the spread to skim more of your money. These are some of the sneaky tricks brokers can use to take a little more than they should and you can track and report them if you find that your spreads and pip values keep changing. Alternatively, you can use WikiFx to find the best regulated and verified brokers who follow strict trading standards. This app also shows you which brokers are known scammers and have bad customer service so you know to stay away from them. You can also report broker misconduct and they can help you recover your stolen funds so next time you are having a problem with a broker try WikiFx

How to set up a trading plan

In a book or document first list the rules of your strategy. Make sure that this is a document you can access every day, preferably when you are trading.

In this document define how much you are willing to risk in a trading day or week. This will give you a well-defined limit as to how much you will lose of your account so that you are able to protect it. You will also define which trading period you will trade during. Eg some may only prefer to trade the New York session because that is the time of the day with the most volume or that is when you are least busy. You have to ensure that you do not become a chart zombie and trade all day. When you do so you increase the number of trades you make a day and risk overtrading.

With each trade you make you look at your trading plan for confirmation and trade accordingly. This will help you follow a trading routine and keep your trading consistent.