Benefits of Making a Trading Plan

I always suggests trader to create a trading plan before markets opens and strictly execute the trades as per the plan. Its a well know adage Plan the trade and Trade the plan.Most of traders trade impulsively in trading,without any plan, they go as per there intuition and end result is losses. I have written many post on how to make trading plan and we cover the same exclusively in our trading course.

Today lets discuss 3 benefits of making and executing a proper trading plan.

1. Increased Confidence

2. Consistent Account Growth

3. Avoiding Account Blow-Up

Increased Confidence

One of the positive side effects of having an easily accomplished trading plan is that it indirectly increases your over all confidence in your trading. As a trader it is very important to be confident for many reasons such as, eliminating hesitation, jumping out of trades too early, not taking profit, etc…By defining exactly what you are going to do on a day to day basis, you can eliminate indecision when your caught in the heat of the moment. The less decisions you have to make as a trader the less emotions can get involved when placing trades. This “un-emotional” state of mind can help you become a better more confident trader that can generate consistent profits.

Consistent Account Growth

Having a trading plan allows you to focus on the day to day activity in your account while maintaining that long term outlook of how you want to build your trading account over time. When focusing on each trade and knowing the different outcomes to expect whether negative or positive on a micro level helps you maintain the equity curve on your account. For example what sounds easier to you, making 200% return in a year or 15 points a day?

I would think you answered making 15 Points per day sounds easier. Well what if I told you that 15 points  a day (With a 5:1leverage working up to 10:1) can result in over 200% return in a year. I think by now you can realize how gaining clarity on the small details and Micro planning can simplify what you are trying to do and ultimately reinforce the small consistent account growth leading to increased profitability.

Avoiding Account Blowup

If your like most retail traders you have experienced at least 1 heart wrenching account blowup. I know in my beginning days of trying to master this enormous market, things can turn against you fast. I learned this the hard way and I know many others can associate with me on that. So how does one avoid this? Trading plan requires an exit plan when things go bad. Furthermore, when your trading strategy is not working with what the market is presenting, what do you do? You need to decide beforehand only in your trading plan.

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