To achieve goals in life you must have a strategy, in the financial markets it is called the trading plan.
Why is it critical to have a trading plan? The answer is simple, to know what I’m doing, where I’m going and why I’m going in that direction.
I don’t want to trivialize an essential aspect of trading but I realize that simplicity very often can open people’s minds without too many words.
I hear people talk about many things but the most important that summarizes the trading plan are my 10 rules that I use every day in the financial markets and also in other work activities besides trading.
Never before has it been as important as it is today to know what we are doing, from many emails I receive daily I see many people who have no idea how the financial markets work, I do not have the presumption to teach or “want” to teach people but the goal of this site is to try to open readers’s eyes.
Now I will start with the 10 rules to define a trading plan:
1) Who am I? How well do I really know myself?
It seems a stupid question but most traders do not know themselves, if it were the opposite 70/80% of those who trade would not lose money but the percentage would be 50/50.
2) Do I have gain objectives?
Many people enter trades without having any kind of goal, when I started I knew what I had to do to get to certain goals. The secret is to spend as much time as possible on the financial markets and observe as many charts as possible.
A person who becomes a professional according to my point of view is a person who lives by being a trader, so if you are really strong at the end of the year your account must be green with a plus in front of it.
3) What are the instruments and markets that are part of my trading plan?
Stocks, bonds, futures, options… the markets I follow depend on where I live in, clearly if I live in Australia it will be very difficult to follow European and American markets. My advice is to focus your energies on few financial markets, for example in the morning follow Europe and in the afternoon follow the United States.
4) What kind of investor am I?
Short, medium or long term. These are all questions I have to ask myself because if today for example I have a time horizon of 1 year and then in a week I start trading intraday it is as if I were doing two different sports.
5) Which platforms do I use?
I add another question, paid or free? Believe me there is a big difference because I see many companies that give almost everything for free but then is it really functional with my goals?
To be clear, if I buy a Bloomberg terminal and spend 30000 $ per year (for example) there will be a huge difference compared to a trader who has everything for free? Or am I stupid that I give Michael Bloomberg all that money?
6) Which is your broker?
In my trading plan I must have a reliable broker, I make an example when the markets are suspended do you think all brokers reopen at the same time? The data flow is not universal and this is very important when trading to have a complete tool box. Those who have experienced a flash crash know what I am referring to about the importance of broker.
7) How do I manage risk, the famous money management?
I have already written some articles and you can find them on the blog or on other sites, psychology is subjective I can not teach anything but recommend reading some books on Poker Holdem mindfulness.
8) When do I enter or exit a trade?
Do I base it on a technical figure or on a signal service or because Elon Musk advised it on Twitter?
9) Do I have an excel file with all my trade history?
Date, time, entry, exit, gain/loss
10) What do I do to improve?
Do I observe the markets, do I buy courses on the internet? Do I follow gurus on social networks or other influencers?
When I make a trading plan I respect these 10 rules that I wanted to share with my readers, some will follow me others will not, the important thing for me is who got to the end of the article.