What to Include in Successful Trading Plan

Do your homework

You can’t expect to successfully trade in a vacuum. Therefore, before the market opens, be aware of what is going on around the world. What are the overseas markets doing? Also, learn what the economic or earnings data is and when that information is due out. Rather than taking an unnecessary risk, it’s best to wait until that report is released. Professional traders are not gamblers — they trade on probabilities.

Prepare for trading

Keep your trading area distraction free because distractions can be costly in the trading arena. Whichever trading program you use, label the major, minor, and resistance levels and set alerts that you can easily see (or hear if you use an auditory signal).

Set exit rules

Your exits are far more important than your entries.  Many traders devote 90 percent of their attention looking for buy signals and almost no attention to when and where to exit — this is a mistake. Traders cannot sell if they are down because they don’t want to risk taking a loss. You need to overcome this thought process or your trading will be short lived. Professional traders commonly lose more trades than they win. However, by limiting their losses and effectively managing their money, they still earn a profit.

Know where your exits are before you enter a trade. Every trade has at least two exits. Also, before you enter a trade, write down what your stop loss amount is if a trade goes against you. Profit targets for each trade are optional as market conditions change that regularly. Remember with any trade never risk more than a pre-set portion of your trading capital.

Set your entry rules

You want your trading system to be just complicated enough to work but simple enough to enable you to make snap decisions. Always follow KISS is trading (Keep it Simple and Stupid)

If you have 15 conditions (many of which are subjective) that need to be met, it will be nearly impossible to actually make trades.