Why should we all have a trading plan and what does it consist of?
A trading plan is the first step well taken to achieve consistency and then profitability, expecting to be profitable and trading without a plan, is like going to a war where we do not know what type of weapons will be used, going to said war and defending myself with what you find along the way. Most likely, you will lose your money.
A trading plan consists of 5 well-structured steps.
1. Select the type of strategy to apply.
2. Select the candidate asset to be operated with said strategy at the appropriate time.
3. Consider how I will manage my account, that is, the operational risk as a percentage of my account. (0.5 to 5% etc)
4. Select the profit-risk ratio that I must consider for said management, 1:1, 2:1, 3:1, etc... and know if, after the invalidity of my operation, I will accept stop loss, or go to coverage
5. Keep a trading diary or very detailed statistics with balance, entries and exits, which allows me to make the pertinent adjustments to my entire plan in case I am doing something wrong, or, consolidate those things that are being done well. so continue.
Finally, you must understand that there is no infallible strategy, however, sticking to one that has been considered in a trading plan with the other elements that I have already mentioned in this text, will allow you to have structure and consistency and thus be able to achieve profitability with the passage of time, guaranteed.
AMTrading
