how to create a trading plan?

by David Jenyns on October 2, 2011

Question by : how to create a trading plan?
Hello folks best regards. Id been trying to operate in the forex market with some demo account and with real ones but with small amounts and I have been swept. so I have read some documents about the trading I know the basic stuff and I have come to conclusion that I need to elaborate a trading plan but Im stuck in the mud in this part I mean I do have the basics like manage the psicologi, being disciplined follow the plan but how to build the plan the structure. Please any suggestion, it could be a website or ideas really helpful. thanks in advance.

Best answer:

Answer by Billy
Build a diversified portfolio

Give your answer to this question below!

Chief October 2, 2011 at 11:58 am

I’ve heard on CNBC a few years ago that about 80% of day-traders loses. I don’t know if you conceder yourself a trader but after you try and try and then realized that short term trading isn’t for you, then you should try something different.

If you want to follow and learn from a retired individual that has 24 years of stock market experience, click my pic and read “About Me”.

Warren534_FuturesTrader October 2, 2011 at 12:05 pm

building a diversified portfolio (as stated in the first answer) is absolutely the wrong approach, particularly when trading forex.

Forex and futures trading requires strict discipline, money management, and risk management techniques, due to very leverage which can lead to large losses when trading in the wrong direction. Stock traders would be well advised to learn these techniques as well.

Here are some good rules that have served me well over 24 years of trading:

1) Before entering any trade, clearly define your entry point, exit point (for a profit), and stop point (for a loss). Do not change these points unless you have a very compelling technical reason (new support or resistance level is defined), and you can reduce your risk.

2) Do not risk more than 5% (or less) of your portfolio on any one trade. This means that if you have $ 10,000, then don’t take any trade that has more than a $ 500 risk to the stop point.

3) Realize that you do not have to always be in a position. Your advantage as a small trader is that you can wait until circumstances and probabilities are in your favor. Don’t trade until everything lines up.

4) Do not get married to a position, and be prepared to get out at any time. Better yet, be prepared to reverse direction at any time, to make money going in the opposite direction.

5) You will almost never buy the bottom or sell the top. Your objective is not to be perfect, but rather to make money.

6) Focus on your risk and manage it, because if you don’t, it will eventually crush you.

By the way, I just turned super bearish, and am short stock index futures, and long costless collars on the stock index futures. I’m also long inverse leveraged ETFs in my retirement accounts.

The Geek October 2, 2011 at 12:25 pm

Hi,

you are not alone! When i first started forex trading, i was lost and it took me 3 margin calls before things started to become better.

1) Proper money management
2) Know your preferred style of trading. For example, scalping / long term. Ranges / Breakouts.
3) Always structured your trade around the plan not the other way around. Hence you need to determine the amount of money you can lose at most, your stop loss and take profit.

First Place Turtle October 2, 2011 at 12:45 pm

A trading plan is a blueprint of your trading strategy. It outlines the details of your strategy, including entry conditions, exit criteria for both Take Profit and Stop Loss, and money management rules (i.e., position sizing).

Although it’s often neglected by most traders, having a Trading Plan is necessary in forex trading. Why? You need a plan to help you stay focused and disciplined in your trading. Without a plan, you’re most likely to give in to emotional trading, which is pretty much synonymous to gambling.

Think of a trading plan like a business plan for your business. After all, that’s the way you should look at your trading…not as a hobby; definitely not as a gambling endeavor; but as a *business*. Keep it serious, and maintaining that attitude will help your chances of long-term trading success.

Good luck!

Michael Truman October 2, 2011 at 12:59 pm

One of the leading causes for the failure of many businesses is their lack of planning. I think most successful people would agree that if you want to be successful in life and business you need to have a plan for how to obtain that success, set goals to meet along the way, and then work on executing your plan and meeting your goals. Trading is no different from any other business in this sense and it is my opinion that those who fail to plan out their trading like a business are doomed to failure as well. With this in mind it is important to have a written business plan for your trading just as you would for any other business.

Comments on this entry are closed.

Previous post:

Next post: