Trading Plan
9 components of a good trading plan 1. Choose your trading medium 2. Psychological preparation 3. Know your risk level 4. Goals 5. Do your homework 6. Prepare your workspace 7. Know your exit and entry conditions 8. Keep a trade journal 9. Reflect on your performance
1. Choose your trading medium
1. Choose your trading medium
Keep It Simple
2. Psychological preparation •
Be psychologically and emotionally ready to trade
Remember, trading should be a rational process, NOT emotional.
2. Psychological preparation • •
Be psychologically and emotionally ready to trade Routine is good
Remember, trading should be a rational process, NOT emotional.
2. Psychological preparation • • •
Be psychologically and emotionally ready to trade Routine is good Don’t take things personally
Remember, trading should be a rational process, NOT emotional.
2. Psychological preparation • • • •
Be psychologically and emotionally ready to trade Routine is good Don’t take things personally Have your trading plan written down
Remember, trading should be a rational process, NOT emotional.
3. Know your risk level •
How much cash are you willing to risk on a single trade?
3. Know your risk level •
How much cash are you willing to risk on a single trade?
Example: Cash balance = USD 10,000 % Risk = 2% Total cash you are willing to risk on a single trade = 10,000 x 0.02 = USD 200
3. Know your risk level •
How much cash are you willing to risk on a single trade?
Example: Cash balance = USD 10,000 % Risk = 2% Total cash you are willing to risk on a single trade = 10,000 x 0.02 = USD 200
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How much cash are you willing to risk in a single day?
4. Goals •
Short-term goals
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Long-term goals
4. Goals •
Short-term goals Daily profit targets
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Long-term goals Weekly, monthly and annual profit targets
5. Do your homework •
What happened to prices overnight?
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What data came out overnight?
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What data is coming out today? Non-Farm Payrolls ISM Manufacturing Index Consumer Price Index Consumer Confidence Existing and New Home Sales FOMC rate decision
6. Prepare your workspace •
Ensure your workspace is clear of distractions
6. Prepare your workspace •
Ensure your workspace is clear of distractions
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Log into your SaxoTrader 2 and make sure everything is set up properly
6. Prepare your workspace •
Ensure your workspace is clear of distractions
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Log into your SaxoTrader 2 and make sure everything is set up properly
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Identify support and resistance levels
6. Prepare your workspace •
Ensure your workspace is clear of distractions
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Log into your SaxoTrader 2 and make sure everything is set up properly
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Identify support and resistance levels
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Post up a list of important news and data due out today
7. Know your exit conditions • • •
At what price would you exit the market with a profit? At what price would you exit the market to limit your losses? Do not try and make mental notes of exit prices!!
7. Know your exit conditions • • •
At what price would you exit the market with a profit? At what price would you exit the market to limit your losses? Do not try and make mental notes of exit prices!!
How to choose exit levels: • Risk-reward ratio • Support and resistance lines • Technical analysis (ie. Moving Averages, RSI, Ichimoku Kinko Hyo) • Fundamental analysis
Know your entry conditions •
Once you know your exit prices, you can identify your entry price
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You should have a good reason for the entry and exit levels of every trade that you execute.
Know your entry conditions •
Once you know your exit prices, you can identify your entry price
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You should have a good reason for the entry and exit levels of every trade that you execute.
How to choose entry levels: • Risk-reward ratio • Support and resistance lines • Technical analysis (ie. Moving Averages, RSI, Ichimoku Kinko Hyo) • Fundamental analysis
8. Keep a trade journal
9. Reflect on your performance •
Add up your profit/loss for the day
9. Reflect on your performance •
Add up your profit/loss for the day
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Understand why you won or lost that day
9. Reflect on your performance •
Add up your profit/loss for the day
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Understand why you won or lost that day
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Assess the market’s volatility for the day
9. Reflect on your performance •
Add up your profit/loss for the day
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Understand why you won or lost that day
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Assess the market’s volatility for the day
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Make a note of what is happening tomorrow which may affect the markets
If You Fail To Plan, You Are Planning To Fail!
Summary 1. Choose your trading medium 2. Psychological preparation 3. Know your risk level 4. Goals 5. Do your homework 6. Prepare your workspace 7. Know your exit and entry conditions 8. Keep a trade journal 9. Reflect on your performance