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I want to talk a little bit about what it looks like to make a trading plan, what should be in that plan, and how to execute it.
If you’re the type that learns better by watching video, you can check this post out in video form here:
I see a lot of traders out there trading without any sort of plan whatsoever, and it scares the living daylights out of me.
There’s an alarming amount of traders just hopping into trades, hopping into Forex, hopping into stocks, bonds, whatever it may be, without any sort of planning.
Look, there is no profession or sport that you would just try to hop into at a professional level without first mastering the basics and fundamentals.
So, let’s talk a little bit about what that should look like for a trader.
I think these plans consists of a few different things, but no matter how different these plans can vary, there’s going be some of the same pillars.
These basics should be in everyone’s plans, let’s break them down:
People don’t understand how risky trading can be.
They don’t know how much risk they’re actually taking in a trade, what they’re actually doing with their money, and how it’s being manipulated and moved around in the form of risk.
Take some time, sit down, think through and actually do the math. I know math is scary for a lot of people. Bust out that calculator!
Go online and find a tool to do it if you need to, there’s plenty of free ones available for you to use.
Understand the risk that you’re taking every time you go to enter a trade. Ask yourself these questions:
Traders accounts get taken out in stupid situations all the time where they didn’t realize what the actual percent risk was.
Maybe they’re using so much margin that they get a margin call and boom, the account just destroyed little by little all the way until it’s gone.
Risk is always the first thing you need to think about!
I’ve run into a lot of traders that have no strategy at all.
Sometimes they are literally just watching the news and guessing which way things are going to go to enter trades.
No matter what you do or whatever aspect of life it is, you need to understand the “why” behind your decisions. If you follow me at all, if you are a member of mine, or if you subscribe to my free trades that I send out each weekend you’ll see a prime example of this. I send you three trade setups every weekend where I walk through my outlook on each pair, and what I’m looking for to happen. I discuss when I want to enter, confirmations, levels to watch for exit, and dive into the thought process I go through as I personally sort through pairs.
Figure out the ins and outs of how you’re going to enter and exit the trade.
This ties right back into the risk. Are you using risk to help filter through your trades as part of your strategy?
It’s also super important that you find a strategy that works for you.
By the way, there’s not just one strategy that works. There’s no holy grail. There is no one indicator that you can throw on there that’s going to work for everybody across the board.
The truth of the matter is you can probably get just about any strategy to work within reason. To prove this I recently did an experiment in my trade group where I literally flipped a coin to decide whether to buy or sell a pair and then did different risk reward ratios on a live demo account.
I entered the trades and just let them go to see what happened, so it was all completely luck.
What happened? I lost 5% on 18 trades. So complete luck and still didn’t blow the account. Using a decent risk to reward ratios I still barely lost anything even though I lost around 80% of the trades.
It’s possible because the winning trades helped mitigate the losses. You don’t need an accuracy of 90+% to make money, you just need a good risk strategy.
So understand your strategy, tie it into risk, and it needs to make sense within the realm of the risk strategy that you are partaking in.
Like I said, just about any strategy could work, but that doesn’t necessarily mean it’s worth doing. So it takes some time to figure out what your strategy is, and when it makes sense to take trades. Here are some things to think about:
Actually sit down and think these things through. It drives me nuts that people haven’t done this. These same traders come to me and ask about a their trade they entered. I can’t answer anything about anyone’s trades until I know the context for why you entered a trade. I have no idea if it’s a swing, a intra day trade, a scalp etc. If the trader hasn’t even thought that out, I really can’t help you with any analysis because I (much like the trader) have no clue what the end goal is.
Please don’t do that. All right? Can we strike a deal here and now?!
Once you to understand risk, I want you to understand strategy.
You need to combine all of these things we’ve talked about to make a complete system. You need to package it all together so let’s take a 3000 foot level view.
I would probably argue that you need a way to track data as well. I like to use Myfxbook but there are other free options available as well.
You can link up your account you can track to see what pairs you’re trading better on. You can see what your risk to reward ratios are and what your returns are. The pips gained and lost, and there’s just a lot of data that you can take and analyze.
Now you have to do actually do something with this data, you can’t just take it and let it sit in a corner somewhere. Use it to tinker with and improve the system you’re building. but build a system.
There is no strategy or system in the world that are going to read about for 20 minutes in a pdf and then go and make billions of dollars in the market. That’s not how it works.
You actually have to put in the time, put in the effort and actually spend time trading it and seeing the interactions. This is key!
Now are there ways to speed that up? Absolutely! The right coach, the right community, the right mentor, the right friends, can all play a role in accelerating your growth? The people who all have insight into the same styles and things that you’re doing can definitely speed up that process because you’re being surrounded by people that do nothing but what you do.
I think many of these free trade groups, whether they’re on telegram or whatsapp, can really hold you back if you’re not careful.
It can be a major detriment because you have all these people trading different styles. A lot of people don’t know what they’re doing at all. You’ll have this guy is telling you to buy, and that guy is telling you to sell, and another guy saying to wait. It’s hard to filter through and nobody actually shares the analysis behind what they’re doing typically in these rooms
It’s just “buy this”, “do this”, and then when it works out, they post, you know, an hour later, ” I hope you guys all took my trade because I made a lot of money on that one!”. Then then every time they lose they’re really, really quiet. It can be good to be exposed to some new ideas but once you settle on a strategy and a system, it’s best to avoid these types of trade rooms.
Focus on a risk based approach to a strategy you master while comiling an overall system that has data being tracked that you can improve over time!
These are the three fundamental pillars that I think everybody needs to have to be successful in the long run!
My website and content is going to solely dependent on the forex trading community, and the finance trading community in general.
If you have any questions or if I can help in any way, let me know in the comments down below.
Keep working hard, putting in the effort, and striving to be the best trader you can be!
Want to know our recommendation for top trading books in 2019? Check out our post here!
Jason (better known as The808Trader) started his trading career in college in 2010. After dabbling in stocks he found his way to Forex Markets. The first 4 years were up and down and it wasn't until he discovered the Ichimoku trading strategy combined with countless hours of chart time that it really clicked. Creating his own unique twist on the system and breaking it down in a simplified, easy to understand way using his engineering background, he has accelerated the path to success for traders around the globe.