Why A Trading Plan Is Essential For Trading Success


Without a clear plan, no one can consistently make money. A trading plan allows the trader to execute their trades consistently and without letting emotions get in the way. Clear entry points, stop-loss and profit targets are pre-defined in the trading plan, allowing the trader to focus on executing the trade rather than having to interpret each trade as it unfolds.

For me, in my thirteen years in this business, I have learned a lot and put most of it together into an extended business plan.

A trading plan should include the following:

  • Different high probability trading and investing setups
  • Graphics visually describing each configuration
  • How to set up your charts for each business setup
  • Where to place profit limits and stop orders
  • How to manage risk in every business setup
  • Justification of each trading configuration
  • Asset Allocation Directive
  • How you deal with market psychology, money management, score

A trading plan should also include the time frames within which you decide to trade.

It sounds more complicated than it is. You need to decide which day trading, swing trading, or long term investment time frames best suit your style and / or how you want to combine these three time frames.

For example:

1) (Bucket 1) Time horizon – 1 day or less: A few selected intraday setups in the E-Mini S & P500 index futures contract and individual stocks.

2) (Bucket 2) Time Horizon – 2 days to 3 weeks: Trading on various mid and large cap stocks and ETFs, also possible via the options market.

3) (Bucket 3) Time horizon – 3 weeks to 6 months: 1) A set of long stocks and / or net short options trades on various mid and large cap stocks and ETFs.

Today's dynamic markets demand flexibility in trading times and the adaptability of trading 'systems'. A multi-timeframe approach to trading attempts to seize opportunities within these specific time horizons. The goal is to achieve bigger profits in this way.

The benefits of multi-timeline trading are many and also depend to some extent on the trading / investing strategies used. Most bust benefits are:

  • Significantly decreases the correlation of its portfolio with the market
  • It “ covers '' automatically his wallet by assigning “ long '' transactions and “ short '' at different times
  • Gain a better perspective of the current market point of view and opportunities
  • Find more trades with the most favorable risk / reward ratio
  • Act from a more neutral point of view and without emotions

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