Trading plan has been defined in the part one of this article as a road map to successful trading. In the article, I equally tried to briefly tell you the importance of trading plan and how you can profit big time from planning your trade. I also concluded the article by telling you to develop your own trading plan; and that the essentials of trading plan will be exposed in the part 2 of the article on trading plan.
You must know that trading plan can be simple as well as complex depending on the individual style. But my style has always been kiss i.e. keep it straightly simple. So what you are going to learn in this article is the six essential components of profitable trading plan. What makes a trading plan profitable is the outcomes such a trading plan produces. A trading plan that continues to give positive results and reduces the number of margin calls and losses can best be termed as profitable trading plan. You are going to learn the essentials components that make up this type of profitable trading plan.
Components #1: Realistic trading system
Your trading plan must contain a realistic trading system. This trading system must be the one you have back tested for two or more months while you are demo trading. You must make sure you include all the necessary things you have in your trading strategy such as time frame, entry and exit time, currency pairs you are trading, the indicators you are using etc.
Component #2: Your trading Routine
There is need for you to determine when you will analyze the market and plan your trades; when you will put an eye on the market and when you will measure your trade action. All these should be a crucial part of your trading plan.
Component #3: Your State of Mind
It is very important you determine your mindset before you start trading. This will help you to plan your trade accordingly.
Component 4: Your Weakness
Don't be surprised, if you know your weakness and put it in your trading plan, you will soon realize that you will develop concerted effort to improve on the weakness and reduce such weakness to barest minimal if not totally eliminated
Component #5: Your realistic goals
You need to sit down and determine what your goals are as a trader. Writing these goals down as part of your trading plan will continue to propel you to work towards the achievement of the goals.
Component #6: Your Trading Journal
It is very important you have a trading journal this will help you to log your trade. It will also help you to evaluate your performance in the nearest future. By looking at your performance you will be able to discover where something is wrong and be able to take corrective actions.
The six components briefly discussed above should be included in your trading plan in such a way that you will find it easy to follow. Of what use, is the plan that you develop without properly following it? Of course, you know that such a plan will be as useless as any good for nothing material. You must also realize that developing your plan does not in itself produce positive result. What in actual sense produces profitable result is your ability to follow the trading plan, and work the plan to logical conclusion. It is when you do these, that the above components in your trading plan will produce profitable outcome.
