What is a trading plan?
A trading plan is a method that follows a systematic approach to identify and trade securities. Trading plans look at many variables like an investor’s goals, time and risks as well.

Breaking Down the Trading Plan

You can build trading plans in a variety of ways. Looking at their personal goals and objectives, investors customize their trading plans accordingly. Throughout the investment industry, You can form profitable trading plans which are profitable using mechanisms and methods which are within the trading market.
Investors usually seek trading plans which can gain profits. Some investors try using automated investing plans for saving strategies. A few others engage in active trading approaches to capitalize on the profitable markets by using tactical trade mechanisms.
Automatic investing
It is a savings strategy where investors invest a specific amount and accept the market price. They will have ways to manage risks and will make changes as the market changes.

Tactical trading
This is a method to take advantage of market opportunities that are emerging. It is even used to invest for different objectives. Most traders trade based on macroeconomic trends.

Key elements of a successful trading plan

A plan is an essential component while trading which must be based on the trader. The following are the key elements for any successful trading plan

Skill assessment -Getting ready to trade right? But, did you test it on paper? Are you sure that it will work? Trading is a battle between buying and giving. So, have your skills assessed to see if you can be confident that it works and if you can follow without any hesitation. Remember that professional traders prepare themselves beforehand to get the most profits. So, if you lack a solid plan, you are probably wasting your time and money.

Mentally prepared – How you feel before trading is an essential aspect. Are you worried? Did you burn the midnight toil or did u sleep well? Can you take this challenge? Being emotionally and psychologically balanced and ready is necessary if you are planning to battle in the market. However, if you are in turmoil, it is better to be away and take off.
You should be mentally and physically prepared and you should not keep any distractions in your trading zone. Many traders have their own mantras so it keeps you on track.

The risk level is set – How much can you risk on any one trade looking at your capabilities? This can be scrutinized by looking at trading styles and most importantly, risk tolerance. This level can be anywhere between 1% to 5% on a given trading day. In case you lose the amount, it is better to be away. If things seem to go the wrong way, you must leave and try on another day which might be better for you.

Set goals – It is always important to set targets that can gain profits before you begin trading. Also, keep a look at the minimum risk you will have to bear and the rewards that you can gain which is known as risk/reward ratio. It is quite common for traders to make sure that the profit is usually two or three times greater than the risk. If not, many traders do not usually trade.

Do the background check – it is always safe to see what’s happening in the trading world. Have the overseas markets lowered or risen? What about index futures like S&P 500 or Nasdaq 100 exchange-traded funds? Looking at the pre-market, are they up or down? Looking at Index futures is the best way to find the market environment before it opens.

Trade preparation – you must be alert on support and resistance levels when trading. Know when to enter or exit and always ensure that the signals are very easy to understand and can be detected well.

Set exit rules – exit rules are very important than entry rules since it has a higher amount of risk. Many traders concentrate and look at buy signals but fail to understand where to exit since they don’t care much about it. Thus, this leads to a huge amount of loss since they pay less attention to this factor.
Always remember that each trade has a profit target and when you achieve this, you must exit. Being aware of exits and you should never risk more than the percentage that is set. You can look at this by keeping in mind your stop loss and profit target. If you get to your target, just sell a part of it so that you can move your stop loss.

Set entry rules – exits are more important than entries. But when looking at entries, you must remember that if the minimum target is 2 or 3 times greater than the stop loss, it is safe to buy shares or contracts from there. If there are many subjective conditions, it seems difficult to trade. This is why most of the trades are computerized since computers can trade better. This is because if conditions are met, they hit the entry point. Similarly, on the other hand, if it goes wrong or if a profit is seen, they exit. When it comes to people, they tend to be filled with emotions so trading becomes a difficult task. Thus, be more vigilant and exit when you are going the wrong way. Every decision is based on the probability which computers tend to understand better.

Maintain excellent records – you will know that you are a good trader if you have kept a good record of your trading patterns. This is because if you win, you will know how and why you won. You can analyze your profits, losses and even prevent repeating the same mistakes. You should record all the detailed information from targets to entry, exit, and resistance levels. With this, you can monitor the efficiency of the trade. Also, keep records of the daily openings ranges, market open and close and record comments as well.

Apart from that, record drawdowns which are known as the amounts lost per trade. To look at efficiency, the average time per trade must also be recorded and compare these with the buy-and-hold strategy. Remember that this is your trade and so you are the accountant of your business.

Perform a post-mortem – At the end of each trading day, you should add up the profit or loss. You must write down your conclusions in your trading journal so you can refer them later when creating other trade plans.

Conclusion
There is no 100% guarantee that every trade you go to will give a profit. It is purely based on probability and speculation. It is purely based on skill and chance. You might gain profits and might face losses. However, using these practices, you can increase the chance of getting a profit and reduce the possibility of facing a loss. If you want to be a successful trader and survive, you must be willing to take the risk and at the same time, follow these rules to make your trade a success.