Trading Stocks Online – The Value of a Trading Plan
I started trading stocks online about 10 years and then in 2004 took some classes on trading options and moved into trading options online fulltime 2005. It was during this period that I learned the value of a trading plan. Most of you probably already have a mental plan but how many of you have actually written down? If you have a plan, how many of you are actually following it?
What Is A Trading Plan?
This is a document describing the methods you will develop and use to become a successful trader. It describes in detail how you will proceed to successfully execute your plan. Once your plan has been developed, trade according to the plan you developed. Create a Plan, Plan to Trade, Trade to the Plan.
Why Do I Need A Trading Plan?
“Every successful Professional Trader has a successful trading plan. Without one, you will lose before you even get started. You’ve heard the horror stories of beginning traders getting wiped out soon after making the move to trade professionally. In fact, only about 10% of those who start day trading the stock market are still around after three months.” Taken from “Trading Every Day with the right focus”
What Do I Include In A Trading Plan?
Here is the information that I put in my trading plans
Mission statement
Goals that I want to reach (needs updated periodically)
Rewards — How am I going to reward myself when the goals have been reached
My trading styles
My trading strategies
My risk tolerance — How much am I going to place on a place? How much of my portfolio am I going to risk with all my trades?
Emergency contacts — You should have at least have your brokers phone numbers here
Anything else that you deem important
Where Can I Get Examples Of A Trading Plan
There are many examples of trading plans on the web.
Just search for them. There are also some trading planners for sale. Here you enter your plan information and they prepare the plan for you. I have looked at some of them, but not purchased. From appearances they looked OK but I felt I could just create my own using Word.
If you don’t have a trading plan you should start preparing one and it will help you in organizing your trading habits. One of the key ingredients of a trading plan is discipline. To make a plan work for you, you must have the discipline to follow it.