One simple thing, which adds clarity to your trading, helps make objective decisions and reduces decision fatigue.
Is overlooked by 90% of the traders
The TRADING PLAN
𧡠Thread π
Is overlooked by 90% of the traders
The TRADING PLAN
𧡠Thread π
It outlines when and how trade will be taken, under what conditions, time frame, position size, risk management structure, etc.
Emotions can surge when money is on the line.
Minimising emotional thinking produces better trading results. A plan does exactly that.
Emotions can surge when money is on the line.
Minimising emotional thinking produces better trading results. A plan does exactly that.
I've listed a few essential components you should add to your trading planπ
1. CHECKLIST
Before you sit at your trading desk, you must not be fatigued both mentally and physically.
Check if you're in the right mental state to be trading, i.e. you are calm and confident.
1. CHECKLIST
Before you sit at your trading desk, you must not be fatigued both mentally and physically.
Check if you're in the right mental state to be trading, i.e. you are calm and confident.
2. RISK MANAGEMENT
Extremely crucial to pre-define risk and know your risk appetite.
It helps in keeping your psychology sound and allows you to trade optimally.
You can define your risk per trade, trading session, weekly etc.
Extremely crucial to pre-define risk and know your risk appetite.
It helps in keeping your psychology sound and allows you to trade optimally.
You can define your risk per trade, trading session, weekly etc.
For instance, "A" could decide he will not trade for the day if he loses more than 1% on a single trade.
While "B" decides that his trading week would be considered done if he loses more than 3% in a week.
While "B" decides that his trading week would be considered done if he loses more than 3% in a week.
PS:- It's necessary to take breaks in a high-stress career like trading, especially after a substantial loss.
Always better to restart trading with a fresh mind, not letting the past loss affect future trades.
Always better to restart trading with a fresh mind, not letting the past loss affect future trades.
3. POSITION SIZING
Again, this step is also to stop you from hurting your psyche.
Trade with a posn size in which you're comfortable losing money.
You tend to act fearlessly, and fear cannot cloud your interpretations and decisions.
Posn size = Stoploss budget / Risk per unit
Again, this step is also to stop you from hurting your psyche.
Trade with a posn size in which you're comfortable losing money.
You tend to act fearlessly, and fear cannot cloud your interpretations and decisions.
Posn size = Stoploss budget / Risk per unit
4. ENTRY
Keep your entry criteria very clear and concrete.
You see the setup, you enter the trade..
The thinking had already been done when the plan was being crafted.
Hesitation is a traderβs foe.
Keep your entry criteria very clear and concrete.
You see the setup, you enter the trade..
The thinking had already been done when the plan was being crafted.
Hesitation is a traderβs foe.
5. EXIT
a) SL gets hit
Exit your trades when SL gets hit.
Little to no space for hoping in trading.
If the trend in the larger TF goes according to your view, you can always re-enter the trade.
Stop losses do hurt, but they let you live to fight another day.
a) SL gets hit
Exit your trades when SL gets hit.
Little to no space for hoping in trading.
If the trend in the larger TF goes according to your view, you can always re-enter the trade.
Stop losses do hurt, but they let you live to fight another day.
Try not to keep a mental stop loss, have it on your chart or in your order.
Mental stop losses are VERY susceptible to shifting π
Mental stop losses are VERY susceptible to shifting π
b) Price reaches your target
You have two options in this case.
You can either square off the trade.
Or
Trail the profits.
You can choose whichever option you like.
Just remind yourself not to CROSS the line from self-confidence to euphoria.
You have two options in this case.
You can either square off the trade.
Or
Trail the profits.
You can choose whichever option you like.
Just remind yourself not to CROSS the line from self-confidence to euphoria.
6. LOG YOUR TRADES
Maintain a record of your trades.
The rationale behind them, the Time Frame, the Risk to reward ratio, entry, exit etc
Everything related to a particular trading session.
Maintain a record of your trades.
The rationale behind them, the Time Frame, the Risk to reward ratio, entry, exit etc
Everything related to a particular trading session.
How else would you analyse your trades, take note of your mistakes and recognise patterns in your trading?
The first step to overcoming a problem is to identify it.
You should craft one according to your requirements and keep modifying it till you feel it's perfect for you.
The first step to overcoming a problem is to identify it.
You should craft one according to your requirements and keep modifying it till you feel it's perfect for you.
If you like this thread, do read this thread I recently wrote on the book "TRADING IN THE ZONE".
I hope you've found this thread helpful. β€οΈ
Follow me @mohitsharmadl for more.
Like/Retweet π the first tweet below if you can: π
Follow me @mohitsharmadl for more.
Like/Retweet π the first tweet below if you can: π
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