You begin trading to earn money. You cannot do it properly without a good trading plan. Developing it and following it are some of the most important trading components. How to do it so that it serves its purpose well?
How to design a good trading plan
The first rule for a good plan is that it is yours. It should contain some certain items, but it has to be made in accordance with your preferences. Let’s see what these objects are.
Period of time
Your plan should be designed for some time being. I begin with a week. During this time I test my plan and note the results. When it turns up efficient, I will use it for a month.
Keep your trading journal to be able to review all your past doings. Also, you can view the history of your trades under Closed Trades on the Pocket Option platform.
Financial instrument and the market
There are many markets such as forex, stocks, indices, commodities or cryptocurrencies. Choose a few instruments to trade. It will be just easier for you to focus on them. Also decide which trading mode you will use: Quick trading or Digital trading.
Furthermore, you should decide when the best time to trade a particular instrument is. Consider your time zone and the strategy you are going to involve.
Next, think about what trading strategy you are going to apply. There are plenty of Pocket Option strategies described here. Additionally, you can create a unique method. Remember to test it first.
More complicated does not always mean better. Sometimes the simplest ones work just fine.
This point is not only about the overall capital in your account although this also matters. First, you should plan what amount of money you will deposit into your account. In the case of using all the funds, do not start again until you come up with a new plan as this means something went wrong.
Then, decide how much money you want to put into one transaction. It may be a fixed amount, for example, $10. You may also wish to invest profits so the original quote will go back to your account.
Next, what is your profit target? Having in mind a particular sum will help you to determine how much you need to invest in a single trade and how many transactions you should open to achieve your goal.
You must be prepared for the situation when not all goes as you wish. You may experience a severe loss or get to your target much faster than you anticipated. The question is what to do next. Should you stop trading or open new transactions?
The most important task is to protect your capital. The decision should be taken individually after a deep analysis of your situation. Assess in what emotional state you are in. You should not take trading decisions under strong emotions.
Questions that your trading plan should answer
Having a trading plan is essential. Even if it is not perfect at the beginning it is much better to create it than not. You can use the following questions to make a plan for yourself.
- What is the time period I am going to use the plan?
- What types of financial instruments and markets will I choose?
- What will be my trading strategy?
- What kinds of indicators will I use?
- What will be the chart timeframe?
- How much money can I deposit into the account?
- How much money will I invest per trade?
- What are my exiting conditions?
- What is my risk management strategy?
- What will I do when something goes wrong?
Remember, the plan is yours. Add whatever points you consider valuable. Always start the trading session well prepared.
All the best!
Risk Warning: The trading products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds. You should never trade money that you cannot afford to lose.