In previous lessons, we mentioned that traders can improve their trading results by drawing up a plan.
One of the main elements of a trading plan is a trading strategy. You already know that trading strategies are based on technical or economic analysis and guide you toward making trades. You can combine several strategies at a time. Olymptrade offers multiple ready-to-use strategies as well as the opportunity to create your own custom strategies. You can find strategies in the Market or by clicking the Technical Analysis icon on the chart.
A trading plan includes your trading strategies and other things such as your overall trading goals, your motivation, trading journal, trading psychology, and money and risk management techniques.
How to create a trading plan
1. Recognize your strengths and weaknesses in trading. Perhaps you have the patience to wait for a good market entry, or you’re enthusiastic about learning and upgrading your skills. You’ll then be able to capitalize on your strengths and think of how to reduce the impact of your weak points.
2. Outline what motivates you to trade. Are you trading to increase your income, or do you simply enjoy the process itself?
3. Write down your trading objectives. Having a goal to look towards will help you stay on track. It’ll be easier to close your trades on time instead of increasing your risk by keeping them open in hopes of more gains. Make sure you set realistic goals.
4. Check your trading strategies. Ensure that the strategies you use are right for the state of the market and the assets you have chosen. Make it a habit to test new strategies on a demo account.
5. Make time to read the news. It’s important to know what’s going on in the world’s key economies and financial markets, so choose reliable sources and monitor them as part of your trading routine.
6. Outline your risk management approach. You need to choose how much to spend on each trade and whether to increase this amount in proportion to your account’s growth. It’s vital that you stick to this plan unless you purposefully decide to change your approach, in which case you should record it in your trading plan.
7. Monitor your emotions. When you analyze your emotions during trading enough to understand them, you’ll know what to expect, be better at controlling yourself, and keep a cool head during stressful times.
8. Keep a trading journal. Write down your reasons for entering and exiting every trade, as well as your targets and any underlying emotions during each stage of your trading activity. The more information you have, the easier it will be to analyze your trades and learn from your experience. If you don’t record anything, you won’t be able to remember the details of a particular trade, which means you are more likely to repeat your mistakes and less likely to grow from them.
9. Make time for analyzing your past trades. You may be tempted to focus only on your current trades. However, if you want to improve as a trader, you’ll need to review your activity and expand on your knowledge.