What can a trading plan do for you?

The purpose of this article was to highlight fundamental components needed in a trading plan.

You may have a strong trading strategy, boasting a high win rate, but without correct risk and money management principles defined within the overall trading plan, you’ll likely still lose money.

To wrap up, the following lists some of the reasons why a trading plan is beneficial and why it is required to successfully operate in the market:

• Without a trading plan, the act of trading becomes frustrating, stressful and a pointless exercise. Following a plan helps employ discipline and structure.
• Takes away much of the decision-making process – the trading setup is either present or it’s not. When live funds are on the line, a trading plan helps maintain a certain amount of equanimity and keeps you from making illogical and often impetuous mistakes.
• Gives you the ability to monitor your progress, identify mistakes and alter the trading plan accordingly. Keeping a trading journal helps.
• Allows financial and developmental goals to be clearly defined.
• Identifies the markets you wish to engage in.
• Produces a clear understanding of risk and money management principles.
• Organises times of trade.