A trading plan for a trader is an instruction, following which the trader step by step achieves the set goals, gradually moving forward. The absence of a thought-out plan means the absence of specific goals and ways to achieve them, that is, chaos, leading to loss. In the last review, we looked at several sections of the trader’s trading plan, we continue further.
Trader’s Trading Plan
- Selection of a trading asset:
- Cost Estimation: Spread, Commissions, Swaps.
- Evaluation of volatility in a particular session.
- Correlate the selected tool with other tools.
- Broker technical terms for the selected asset (indicated in the offer).
- Availability of information for analysis (statistics, reports, news).
The ratio of risk and premium should be optimal. The higher the risk, the higher the costs, but the higher the amount of profit. There are mathematical models that allow to reach the optimal index. For example, the simplest option is the Sharpe ratio.
- Money Management:
- Distribution of total capital into groups: starting, investment, reinvestment, insurance (reserve).
- Calculate the acceptable level of risk, taking into account the requirements of the broker stop-out and margin-cola.
- Action plan in case of force majeure: anomalies, abrupt drawdown, entry errors.
- Terms for using high-risk instruments (Martingale, pyramiding).
- Capital insurance (hedging risks).
- Terms and conditions for depositing and withdrawing money.
- Terms for making changes to the trading plan.
- Fundamental analysis in a trader’s trading plan:
- Selection of authoritative sources with relevant updated information: analytics, statistics, reporting. Ideally, the source.
- Daily analysis of statistics and forecasts, drawing up an action plan based on the information.
- Evaluation of the effectiveness of discussion of controversial issues on the forums.
- The conditions for applying the results of fundamental analysis and its comparison with the technical one.
- Technical analysis in the trading plan of the trader:
- Asset analysis on different timeframes, assessment of resistance and support levels, trend lines.
- Graphic analysis. Formation of patterns, round levels.
- Testing strategy and conditions for which you need to optimize it.
- Evaluation of the statistics of false and true signals on a historical period.
- Trade Mode:
- Assessment of asset liquidity and volatility at different sessions and time intervals.
- The response of the tool to fundamental factors.
- Evaluation of the stability of the broker and the platform (order execution speed, no freezes, cancellation of orders).
- Analysis of non-standard market situations and transactions that are beyond the scope of the strategy.
- Thinking through actions while the deal is open (controlling the stop, news, or switching attention to another strategy).
- Psychological control:
- Ways to control emotions during a profit or loss.
- Ways to tune yourself to make a decision.
- Options for getting out of a negative emotional state.
Items of the trader’s trading plan can be changed, revised, added, excluded. What to focus on – a personal matter. But we would not recommend discarding the trading plan as a waste of time. At a minimum, its compilation will help form in your head an image of what you want and how you plan to achieve it. What would you recommend to add to the trading plan of the trader? Write in the comments!