The trading industry might seem unpredictable and intimidating, but there are ways to make sense of the changes and different trends that give this industry the direction. There are two main ways that people follow trading plans. They either trade through brokers, who do this for a living and know how to curate a successful plan for any specific customer. Those who have been in the industry a while sometimes come up with a plan on their own so they always know what they are after and what they can and can’t afford to do.
The trading plan (or trading methodology like InvestingHaven’s proprietary in-house built model) might seem pointless since the trading markets are unpredictable, but it’s impossible to control the events that eventually shape the market but the plan can help you deal with the said unpredictabilities and provide you with the necessary security and order to make sure that even in the more chaotic periods of the market, you are on your track and controlling your situation.
Having a trading plan means that you know when to take your profit when to give up and cut your losses. None of the successful traders do their business without a plan so here’s a couple of things to keep in mind when coming up with a trading plan for markets.
Know your boundaries
A common approach to trading plans is to copy it from someone else, access the websites and broker from popular providers. But managing these markets is not easy as was evidenced by the major shift in the SA regarding trading. While there were many successful cases, listed South Africa Forex broker here, the fraudulent activity also took off when the new market was introduced to people with no experience at trading. Following other peoples’ or country’s example could work, if you are dealing with entities that have similar resources and have a similar attitude towards risk and how much they are willing to lose. Since the chances of similarities across all these criteria are low, it’s always better to create a trading plan by considering the specifics of your situation, specifically: your assets, how much you are willing to lose, boundaries for such loses, your trading goals, the specific markets that you want to trade-in,(stocks, bonds, fx,). You might think that your boundaries will be evident to you throughout your trading journey, but it is better to be prepared in advance because sometimes when the stakes are high and you are pushed into an unpredictable situations you need to have the well thought the strategy for what you want to allow and actions that you’d’ rather avoid. Boundaries need to be set in advance for traders to be able to make the whole process easier, make decision-based on fact and not give in to feelings while working towards the improvement.
Managing timing, risks, and money
When trading, it is extremely easy to let the thing get out of hand, which is why strict discipline is so necessary. In your trading plan, there are three basic things that should always be present and that will shape your trading journey and make you a better trader. In your plan, you should outline right away how much money are you willing to spend on your trading every day, or every week. It’s easy to get too much into it and neglect your other responsibilities when things are going right, but unless trading is already your full-time job, you can’t allow it to take over your entire life, not only because it’s bad for your health and other in your life, trading all the time is simply not profitable. You need designated hours a day when you can focus on your trading, whichever market it may be. Some markets are open according to normal working hours but others function 24/7. According to which market you are trading on you can choose the convenient hours and then only dedicate your time to this business in these specific hours.
When it comes to money, it’s good to have a goal that you can work towards. You can set out a specific number that you want to make by trading and find ways to get there. This will give you more motivation and keep you going even when the market isn’t moving in your favor. After that it’s crucial to establish your attitude and boundaries with the risks and how much exactly can you afford to lose before you have a tough financial situation at hand.
But in order to grow your assets, you will need to take some risks every now and then so it helps to know when you think the risks are appropriate in advance and to what degree are you willing to put you an existing asset in danger for a chance to make a great profit. The risks need to be predetermined and should be monitored, even if this sounds contradictory to the nature of the risks.
When it comes to trading plans, you should ideally have short-term and long-term plans that will be updated frequently accordingly to changes in your own life. Even the long-term plan might need to be altered as you make new goals and get better at trading with time.