Acquiring the
ability to formulate a strong trading plan and implement it is vital in online
trading. A well-crafted plan will provide you with direction on selecting the
suitable market to trade in, help you identify the ideal moment to take
profits, or recognise when to close loss-making positions. In this article, we
will look at what a trading plan is and the various steps you can follow to
build a strong trading process.

Building a
strong trading plan and creating a strong trading process is not an easy task
and should be revised according to your skills and progress.

One of the
first things you need to do is write a comprehensive plan with clear objectives
that cannot be changed during trading, but that can be reevaluated when the
markets are closed. This plan should be adjusted based on changing market
conditions and your own increasing skill level. It’s crucial that you create
your own plan, taking into account your trading style and objectives. Using
someone else’s plan would not reflect your unique trading characteristics.

What is a
trading plan?

A solid trading
plan is a thorough guide that aids in making decisions related to your trading.
It assists in determining what to trade, when to trade, and how much to trade.
It’s essential to develop a personalised trading plan rather than using someone
else’s plan as your own as their level of risk tolerance and available funds
may vary greatly from yours.

A trading plan
is important because it can assist in making rational trading choices and
defining the ideal parameters for your trades. It is beneficial to have a
well-structured trading plan as it can prevent impulsive decisions made in the
heat of the moment.

Trading plan
vs. Trading strategy

A trading plan
is a methodical approach utilised for identifying and trading securities,
taking into account various factors such as investment goals, risks, and time.
Having a strong trading process will help you establish guidelines and criteria
for selecting asset classes and executing trades. It should be noted that a
trading plan is distinct from a trading strategy, which dictates how to enter
and exit trades to maximise profitability and minimise risk exposure. A trading
strategy may be based on either technical analysis or fundamental analysis.

Advantages
of having a trading plan

1. By having a
strong trading process in place, you can trade easily without having to waste
time or energy, as you have already done all the hard work.

2. A plan will
guide you to make decisions without any emotional effect, and will be ready to
take profits or cut losses rationally.

3. By following
your trading ideas and plan, you will have a clear head and will be more
objective, gaining more insight into your trades and finding what works and
what doesn’t.

4. By keeping
records, you can learn from your mistakes and make better and more
well-informed trading decisions in the future. A profitable trading process may
take time, and will involve challenges and mistakes, but as long as you
minimise losses and improve on past mistakes, you will find the confidence and
build the trading strength to face new challenges and be more prepared.

Trading plan:
Things to have in mind

Your trading
plan may encompass any information that you find helpful, but it should always
try to address the following questions:

1. Do you have the skills needed to start
trading?

2. What motivates you to start trading?

3. How much time do you want to commit to
trading?

4. What are your trading goals?

5. Are you ready to take risks?

6. How much capital can you allocate for
trading?

7. What markets do you want to trade?

8. What steps will you take for keeping
records?

1. Skills

You need to
approach trading as a job and not as a hobby, ensuring that you have done your
homework, acquired the necessary knowledge and practised your strategies.

2. Motivation

To do well in
trading, you need to have an incentive that is deeper than the desire to make
money. Find out what trading means to you at a personal level and why it is
important to you. What draws you to the markets, for example? If you have the
desire to solve a puzzle, enjoy the feeling of trading as a stimulating and
intellectually challenging experience, or as an exciting game of probabilities
and chances then you know what makes you tick as a trader. You may like the
adrenaline of competition or making decisions based on instinct, or you may
want to enjoy working from home. If you know the answer, then you know your
goals and you can formulate a style of trading that fits your profile.

3. Time

Think about how
much time you can dedicate to trading. Can you trade while you’re working, will
you make many trades a day, or you’ll need more time? Don’t forget to set aside
enough time to prepare for trading, practice your strategies, get more trading
tips and trading ideas, and analyse the
markets.

4. Goal-setting

You should set
goals you can achieve and be very specific. Don’t set unattainable goals,
otherwise you will get disappointed.

5. Taking risks

Before you jump
into trading, it’s crucial to figure out how much risk you’re comfortable
taking on. This includes considering how much risk you’re willing to take for
each trade as well as for your overall trading strategy. Keep in mind that
market prices are constantly fluctuating, and even the safest trades come with
some level of risk. Some beginners prefer to start with a lower- risk approach
to get a feel for things, while more advanced traders are willing to take on
more risk in pursuit of bigger rewards. Ultimately, it’s up to you to decide
what level of risk you’re willing to tolerate.

6. Capital

Before you dive
into trading, it’s important to take a look at your finances and figure out how
much money you can comfortably allocate towards it. Remember, never risk more
than you can afford to lose because trading can be risky and you could end up
losing all of your trading capital. If you don’t have enough funds to start
trading yet, you can practice on a demo account until you’re ready to go live.

7. Markets

Select the
market you want to trade in. Are you trading forex or shares, indices or
futures? Each one of these is different and will require specific knowledge.
Learn as much as you can about each asset class including how volatile the
market is and the factors that influence the price of each asset and trading
instrument you want to trade.

8. Keeping
records

If you want
your trading plan to be successful and build a strong trading process, it’s
important to keep a record of all your trades in a trading diary. This will
help you figure out what’s working well and what isn’t. If you ever deviate from
your plan, make sure to write down why and what the outcome was. The more
detailed your diary is, the more helpful it will be.

If you’re ready
to start trading, you can open a live account with T4Trade or try out the demo
account to practice without risking any money.

T4Trade live
trading account

To open a trading account, you can visit T4Trade’s website and click the Sign up button at the top right-hand corner. You can then fill in all your personal
details. When your account is approved, you will receive an email with your
trading account details, how to fund your account and how to upload all the
required supporting documentation. To unlock the full functionalities of your
account, you will have to upload proof of identification (passport, ID, driver’s
licence) and proof of address (recent utility bill, bank statement, or any
other official document less than 6 months old).

For more information, you can log in
to the Client Portal or contact T4Trade’s friendly customer support team which is always available 24 hours a
day, 5 days a week.

DISCLAIMER:
This information is not considered as investment advice or an investment
recommendation, but is instead a marketing communication

This article was written by ForexLive at www.forexlive.com.