Building a robust trading plan
Building a robust trading plan
Preparing yourself for the challenges of executing trades is fundamental. Building an effective
trading plan is crucial part of this process.
Key components:
- It provides you with a structured approach to trading.
- It instils discipline by outlining specific entry and exit criteria.
- It reduces the risk of psychological bias and emotional trades.
The action plan:
- Review the current market conditions and your underlying analysis. Confirm
that both your fundamental outlook and technical signals are in agreement. - Evaluate why you have dismissed opposing information.
- Identify key support and resistance levels to pinpoint optimal entry and exit
points. - Specify the price level at which you plan to enter the trade.
- Establish a realistic take-profit target.
- Set a stop-loss at a point where the trade no longer aligns with your initial
analysis, indicating that your position is invalid. - Determine how much you are willing to lose in a single day.
- Adjust your position size so that potential losses align with your predetermined
risk tolerance and budget. - Enter the trade once the price reaches your entry level or set a pending order
at that price.