Trading plans- everything you should know

Truman Slate
How To Build A Professional Trading Plan | by Global Prime | Medium

Trading has become increasingly popular due to how accessible it has become; therefore, if you are a first-time trader, many reviews on the best trading platform can aid you on your trading journey. In addition, a company such as Lux Algo offers tools to ensure traders trade smarter and therefore receive the most out of their tradings. 

What is a trading plan? 

A trading plan is a plan that acts as a decision-making tool for when it comes to your trading. It should include your trading goals, your motivation for trading, how much time you are willing to invest, how much capital you have to risk, your thoughts about risk, the markets you are interested in trading in, and your strategies. 

How to create your trading plan

While creating a trading plan can be very intricate and complicated, seven steps help break it down. First is defining why you want to become a trader, your motivation, and how you will achieve it. Additionally, decide how much time you are willing to invest in trading. Moreover, define your goals by expanding on when you want to achieve your goals and by what percentage. Specifying your goals makes it easy to reach them, as they are in-depth and not vague. It is also imperative to define what type of trader you are. In addition, decide how much risk you are willing to take and how much capital you are ready to risk. Therefore it is essential to learn about the market you wish to trade in. Lastly, have a trading diary to keep track of your progress and see if you need to make any adjustments. 

The five factors of a smart trading plan

There is no difference between a smart and a standard trading plan. A smart trading plan is a plan that goes more in-depth by including five factors to ensure your plan is more thoughtful. The first factor to consider is how long you plan to hold your stock. The second is how you are going to enter the stock market. The third factor is what your exit plan will be. The fourth factor highlights how much percentage of your money you are willing to lose. Finally, the fifth factor will look at how well you perform, whether you are making or losing money and why that has happened.  

Best trading strategies

A trading strategy is a plan that analysis how specific markets are doing and their price levels. There are various trading strategies to choose from; however, the top five best trading strategies are as follows. First is Trend trading, which uses technical analysis to distinguish the market’s direction. Range trading is the second strategy that is very popular among short-term traders as they often take advantage of the market when the price is within the lines of support and resistance. Third is Breakout trading, which takes advantage of new trends before they “break out.” Fourthly is the Reversal trend, which solely relies on noting when a trend will change direction. Lastly, Gap trending is when no trading occurs, when an asset’s price drops or increases dramatically.   

When starting to trade, it is crucial to create a trading plan that will highlight your goals, the amount of capital you have, what amount of risk you are willing to take, how you plan to enter and exit the markets, and when you want to achieve your goals. Therefore, it is essential to ensure you research and decide which trading strategy best suits you. 

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