Why Have a Trading Plan?
First thing is that we have a Trading Plan so that it keeps us on the right path like a road map and if we don’t have a road map how do we know where to go.
Secondly, having an up to date Trading Business Plan and consistently using it gives us the opportunity to keep a record of our trading results so that we can go back over our trades and identify our weaknesses and strengths so that we can learn from the past.
Thirdly trading is a business, not a hobby (remember that a hobby costs money, a business makes money).
Every successful business has a business plan and a trader’s business plan is his/her Trading Plan and the more diligent you are with your Trading Plan the higher the probability you have of being successful.
What Should Your Trading Plan Include?
First, you really want to have written in your own words a description of your Entry Points, how you manage your trade and how you will exit your trade.
Now this will change as you progress through the different stages of being a Professional Trader (from Paper Trader to Demo Trader to Live Trader).
Included in our Forex education programs are sample Trading Plans that cover all of the major aspects of each of these distinct and vital stages.
Your Plan should cover different aspects including your routine, your mind set, addressing your weaknesses and building on your strengths, your goals for the day, week, month and year.
It is important to include goals in your Plan – this is the area where you want to go into as much detail as possible – it is the area that will motivate you to achieve your goals.
The goals section is where you will go first when you are having a tough time keeping on track.
Your Trading Journal (when you plan to trade – including the session) should also be covered in your Trading Plan, as well as the time you devote to journaling your trades and the time that you review past trades to look for areas of development.
Your Trading Plan is a Living Document
You should go over your Plan at the beginning of every trading session as it will enforce what your trading style is, and at least you should up date your Trading Plan each week.
One of my friends who happens to be a trader said this to me once (well more than once) “you can have all the trading tools in the world but if you don’t have a plan on how you will use them, then you will have a hard time trying to be successful with them”
Trading Plans – Your Trading Business Plan for Success
The reason I am passionate about trading plans is that I did an overhaul of my trading plan recently and found that once I had finished going through it and updating it I traded with more confidence and freedom than I have since April 2003.
The other reason; which is more important to me, is that the all of the traders I have worked with have experienced astounding trading results after clearly writing their Plans and using them to keep them on track.
I also recommend having a Plan for each phase of your Trading Business – Paper Trading, Demo Trading and Live Trading. Each phase of your Business is distinct and you should have structures, goals and measures for each phase.
These are the plans that I use when I trade and the ones that I recommend that all of my clients use also.