If you ask 100 traders to send you their trading plan, I guarantee you will hear the most no answers in your lifetime! Unlike business owners, who always have a plan or master plan for their business, most traders do not take any time to design and follow a trading plan.
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There have been millions of different articles on the Internet about how to write a trading plan or how to learn a trading plan, but what sets this article apart is that I use a few key and vital questions to help you plan. I will help you with your personal transactions. Stay with us.
How many trades do you use to review your trading performance?
In all businesses, certain deadlines are set for performance review. For example, listed companies on Wall Street submit their statements once every three months, and then fundamentally review the work on them and evaluate the companies. . How long do you think a trader should wait to review his performance… annually, monthly or daily?
The answer to this question is very simple. Set your performance review maturity based on the number of trades you make, not how much time has elapsed. Time in the business of trading is really irrelevant. Trading is one of the few topics in which the law of time-space relativity is not observed. Those who have been trading for a long time are well aware that the one-year astronomical performance of a trader can be lost in just two months. In other words, in two months, things may happen in which everything you have earned in a year will perish.
You need to consider the right amount of your transactions. This number should be large enough to have a reasonable statistical sample under review and at the same time small enough that you can carefully examine them and not be boring.
For me, this number is every 20 trades. On average, it takes me a week to execute these 20 trades on different currency pairs. I said this value just to have a benchmark to compare.
Specify the key parameters of your performance
I use the KISS method, or Keep It Stupid Simple, or keep everything stupidly simple. The following two parameters are most important to me:
Ratio of profits to losses
This ratio divides the amount of your profits by your losses. For example, after 20 trades, I have made a total profit of $ 15,000 and I have lost a total of $ 5,000, which brings the profit-to-loss ratio to 3. In other words, this ratio can be translated as I make three times as much profit as I lose. It is good to always follow this ratio in your transactions.
Maximum capital loss
This represents the maximum amount of loss your account has suffered during the trading period. Just like the previous ratio, there is no rule for proper values of this parameter, but you should try to reduce this value over time.
What time of day do you trade?
I always advise mid-day traders to limit the amount of their trading activity. Determine when you are trading from the day and do not be outside the market at those times.
Determine your superiority over the market
As you should limit your trading time, it is better to define your superiority over the market and consider limited trading stops in the market. The more stops you make, the harder it will be to make money on the market.
Be sure to set a limit
Stop loss is not a bad thing. Stop Loss is something that will keep you alive in the long run. My stop loss is a maximum of 1% of my capital. But this amount may not be right for your trading method, so check and find the best amount for you.
Exit time of the transaction
By now you must have heard from successful traders that let your profits grow. Let me know when you understand what they mean by this sentence!
The point is that greed in the trader does not allow a person to close his trading position in time. Therefore, a clear and transparent strategy is needed to exit the deal. This strategy must be in accordance with the personal trading method of each trader so that he can easily communicate with it.
Example of a trading plan
Now that we have reviewed some basic points about the Trading plan, it is time to clarify all the issues with a hypothetical example. Consider the following example:
| My trading plan |
| How many trading positions do I need to review my performance? 20 to |
| When do I get new trading opportunities from the day? 8 am to 12 pm |
| When should all my trading positions be closed? 12 nights |
| How much risk do I take in each transaction? 1 percent |
| How much of my capital do I trade at a time? 10% |
| When do I leave my trading position? When the price of Moving 5 breaks. |
| How do I evaluate my trading performance? With the help of profit-to-loss ratio and maximum capital loss |
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