What is a Trading Plan?

Do you remember the last time you went on your holiday? Did you just pick up the phone and book a flight or did you think about a destination and make some arrangements before your departure?

You do not want to be thinking about what can go wrong back at home when you are on your holiday. The whole point of getting away was to relax.

When you are in a trade, you should not be thinking about what to do every second the market is moving up or down. All of your thinking should have been done before your entry – not during your trade. Professional traders are relaxed and composed when trading. Amateurs are nervous before, during and after.

Spread Bet Trading can be a lot less stressful if you have a plan. So what should a trading plan look like or where do you start?

Your holiday started with a destination. You chose a time frame. In other words, you decided on how long you were going to stay there for. You knew what time your flight departed and landed. You knew the cost of your holiday before you boarded the plane. And you probably had insurance just in case something unexpected happened.

Your trading plan can be just as simple. Your plan needs to be able to answer the following questions:

Which market will I trade? (Destination).

What is my time frame? (Length of stay).

How much risk is exposed to my account? (Cost).

Where will I enter? (Departure).

Where will I place my stop? (Insurance).

Where will I exit? (Arrival).

As basic as this looks, it will at least form a foundation for you to work from. In fact most of the professional traders that I know of, have simple trading plans.

Now of course, each component is a subject on its own; but at this stage I want to keep things simple and on our trading courses & spread bet seminars, we cover these components in greater detail.

Once you have formed your plan, you will find that trading does become more objective rather than rational. You will also find that your trades will become more selective rather than emotional. These are traits of a good trader. A trading plan will also help you to have a structure and to be organised. It will help you to deal with unexpected moves in the market rather than making decisions during a panic.

There is a classic saying in the markets “Plan your trade and trade your plan.”

Until next time, I wish you safe trading.

Sandy Jadeja | Chief Market Strategist

sjadeja@odlmarkets.co.uk