Trading is a business and for a business to survive it must have a plan
A SMART trading plan is the key to your success as a trader. When I say SMART, I mean that your plan must reflect the following key criteria that is part of my philosophy in trading:
Simple:
Keep your plan simple — it is easy to get bogged down with too much information in trading and overcomplicate it with too many rules. I like the KISS method “Keep It Simple Stupid”. For a technical trader, it should simply be about trading in the direction of the trend and exiting when the trend changes. But that is always easier said than done, because emotions often come into play and affect your trading decisions.
Mindset:
You are the most important part of your trading. It is what goes on inside your head that will make or break you as a trader. You need to develop self-awareness and understand your motives for trading. Trading is not just about making money — money will flow from good trading.
Approach
that suits your personality: Trading is about developing an approach that you are comfortable with that suits your personality and lifestyle. Your own personality influences the way you trade. Each person has a different psychological makeup and different reasons for wanting to trade the markets. If your approach does not reflect these things, it is unlikely that you will follow it.
Risk and money management: Managing your risk and money will be one of the keys to your success in the markets. You need to include information in your plan on how you will determine your position size, your capital allocation and stop loss methods.
Trading system: This is the method you are going to use to trade. Your system will include the signals you will use to enter a trade, such as the set-up and trigger criteria and, most importantly, your exits.
The headings that should be included in your trading plan and areas you need to cover include:
- Goals & objectives of trading
- Trading structure
- Trading tools
- Trading style
- Trading indicators
- Risk & money management
- Market exposure guidelines
- Trading system(s) (including your set-up and trigger criteria for each system and exits)
- Trading routine
- Trading performance and analysis
- Contingency plan for all worst-case scenarios
- Personal trading rules (personal psychological rules to assist you with your trading)
A trading plan is your road map in the market — without it you will get lost
Copyright Smart Trading 2009
About the Author
Best selling author of “Smart Trading Plans”, Justine Pollard is a successful private Australian stock market and CFD trader, experienced trading educator and sought after trading mentor. Justine specialises in supporting traders to become peak performers in the market.
Justine has been interviewed in many media articles and included in top trading books such as “20 Most Common Trading Mistakes”, by Kel Butcher and “Real Traders, Real Lives, Real Money”, by Eva Diaz.
If you are looking to start trading or have been struggling in the markets then go online now to get Justine’s FREE special report – ‘10 Tips to Smarter Trading’ – www.smarttrading.com.au
