subject: Traders need a trading plan [print this page] Traders need a trading plan Traders need a trading plan
A consistently profitable trader can take a average trading strategy and make money with it. How do stock or futures traders do this? They make less risky trades.
A consistently profitable trader will find a strategy that offers them a higher than average probability of success. They read articles like this one and formulate a winning strategy. You need solid trading plan. The consistently profitable trader will use this for every trade and not deviate from it. Many new traders fall into the habit of making emotional trades that is not part of their trading plan and make money the first time. This leads to a false sense of security and making risk trades.
A CPT will never enter into a trade unless they know exactly how they will manage the trade from the entry price, protective stop, breakeven, exit strategy, this is how profitable traders earn a living. Managing your trade this way will take some of the emotion out of your trading. This allows you to become more profitable with your trading.
Your trading plan should say at what point you bring your original protective stop to breakeven once price moves favorably for you. Allow the trade to move far enough in your favor so as not to get stopped out prematurely especially if you trade the Forex markets. Traders should try and allow the trade to cover the price of commissions by adding one price tick above your breakeven price. A smart trader will follow their trading plan and never use emotions such as hoping, praying and or wishing. Once the trade shows signs of failure, the trader will allow the market to come back to their protective stop and not just exit because they want to save a few ticks on the loss.
The severity and ferocity of some of the moves we have seen this past twelve months in the currency markets is testament to uncertainty that the whole world faces on a global, economic and fundamental level. Attempting to read between the lines of any bit of information thrown our way could have rewarded the Forex trader handsomely one day, only to then go on to cripple him or her the very next. This is why you need a solid trading plan.
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