Establishing A Day Trading Plan

How important is it to have a trading plan?

Why do you need a trading plan?

This article will explore the many important aspects of why you should have a trading plan, as well as the essential elements of your trading plan.

A trading plan is of high importance to your trading success. Trading is a business, and most businesses need a plan. Careful planning is fundamental to your success. In fact, strategic planning will do you well in business as well as in trading.

When you don't have a trading plan, your trading decisions are usually based on hunches and emotions - and chances are you will not achieve trading success, over the long term.

If trying to trade without a trading plan - costly mistakes are inevitable. Emotional decisions are the most destructive factor for a trader. Do not let your emotions dictate your trading habits.
It is not necessary to have a complicated trading plan, keep your trading plan simple. Have a written trading plan, as the process of writing things down can be critical to your success as a trader.

After spending many trading days paper trading your system, you are more easily able to set out and prepare a trading plan.

A trading plan must include not only your goals but must also detail how you plan to achieve them.

Consistent actions can only be achieved through a detailed written trading plan. Traders must trust their trading plans, and remain true to there trading plan.

A trading plan must cover some basic issues such as your trading goals and objectives. A trading plan must include your entries, profit targets and stop loss.

Entering into a trade is one of the first decisions you make when trading. However, it is also one of the least important…….

A trading plan must also cover position size. How much are you prepared to lose on one trade? The lower the percentage of your trading account dedicated to any one trade, the greater the chance of your being successful. You need to know the maximum amount at risk for each trade. You also need to know the maximum amount you are prepared to lose for the day before you stop trading. Protecting your capital, or money management, is clearly an extremely important part of success.

The goal is not only to make money, but also to be able to continue to make money consistently for an extended period of time.

When in a winning trade, be patient and fully capitalize on the success. The familiar trading axiom is, "cut your losses short and let your profits run".

A trading plan must define specific goals to accomplish within a set time.

Having a written trading plan gives you an edge over most others and as the failure percentage of traders is so high, how can you afford not to have a written trading plan.

A written trading plan will not guarantee you success, but not having one will pretty much guarantee failure.

The key to any trading plan is how well it holds over time.

Have you paper traded your system for a good period of time? This would give you confidence to take every single setup. If you have a few stopouts in a row, which is bound to happen at some stage, you continue to take all the trades. Will your system work in the long term?

You have tried it and tested it and you are happy to go live with it. Now is the time to write out your trading plan.

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About The Author:
Linda Wainman is author of the "Keeping It Simple Day Trading System"
You Can Learn to day trade and make money consistently
Visit http://day-online-trading.com
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