How to create your personal trading plan


AtoZ MarketsThere is an old proverb that I like: "Fail to plan and you plan to fail." Traders who are serious about being successful should follow this logic. A well developed personal trading plan could be the key to success.

A trading journal is a developed to define your trading structure, activity, and analysis. It can be an extremely useful tool providing you feedback, helping to focus on planning and execution of your trading strategy.

However, here is no perfect blueprint for your personal trading plan. Every trader and strategy is unique, and different styles suit different people. But certain elements are always consider when building your own plan.

Main plan rules

While no absolute blueprint exists, there are three main rules that will be extremely helpful for you in any case.

1- Write it down. You should physically write down your reasons for trade entries, key objectives, and finding made from a weekly analysis. This will help you to organise your thoughts and give your personal trading plan solidity.

2- Record your progress. Develop a clear and structured method of recording your trades. It is critical to be able to view your past and present trades, both from a learning perspective and further strategy development.

3- Control your finances. Money management is a third crucial rule of any trading plan. You need to have a plan for managing your investments, particularly your exposure to risk.

Your personal trading plan

Now that we have defined the three main rules to keep in mind, we can continue to structure your personal trading plan.

Set Goals

To begin, set realistic weekly profit targets and entry risk/reward ratios. What is the minimum risk/reward you will accept? It would be advisable to set it between 1:1 and 1:2.

Set Risk Level

How much of your portfolio should you risk per week? More importantly, don’t risk more than 2% to 3% of your equity on any entered trade.

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Do Your Homework

Before the market opens on Monday, what is happening around the world? Has China stabilised its market? Are index futures such as the S&P 500 up or down? Has Crude oil price increased? How does Fed stand on further interest rate hikes?

Upcoming News

In addition, note down major upcoming data released like Labour data, CPI, GDP and important events such as central bank speeches and policy decisions. How do the events influence the local currency?

Do Your Analysis

Thoroughly do your technical analysis strictly based on your trading strategy and set criteria. Identify the main trends, support and resistance levels. Before you enter a trade, you should know where you will exit it.

Log it

After each trading day, or week, adding up the profit or loss is secondary to knowing the why and how. Write down your conclusions and mistakes in your trading journal so that you can reference them again later.

My trading plan example

With emphases on technical analysis, your personal trading plan could look similarly like mine did.

How to create your personal trading plan My personal trading plan (click to zoom-in)

Bear in mind that this was not the initial structure of my personal trading plan. Similarly to building a trading strategy, it had to be readjusted and amended.

Also see: Forex Trading Journal

Bottom line

There is no such thing as winning without losing. Professional traders know before they enter a trade that the odds are in their favor or they wouldn't be there. A personal trading plan is a milestone towards being successful and treating trading as a personal business.

 

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