This article begins a series of my articles in which I will explain how to become a professional trader. In these articles, I will describe methods of technical analysis, psychological approach and describe a system for managing capital. You will not find the holy grail but I will describe the most important elements in the process of becoming a professional trader.
Whether you're a born trader or learned one we have to have a plan. The plan by which we enter and close our transactions. The plan that we stick to, because only consistency in action can lead us to success.
Trading Plan - Your own trading plan which sets out all the information about position management, risk management, emotional and psychological aspects. The plan should be possible to fully comply with all the assumptions that have accepted in the course of the investment. It should be as simple and transparent, focusing on both the situations when you open position everything goes according to your view, but also relate to the reverse situation. Embracing the opportunity to change your mental attitude, the impact of emotions on decision-making.
This Plan must be included the following information:
- Strategy trading business - find currency pairs, the levels of input / output of position, etc.
- Risk management / position - the size of opening position, the opening position, the method of closing the position, etc.
- Settings mental and emotional during trading, but the impact on their personal lives, transactions
Proper preparation of the Trading Plan should start by answering a series of very important questions, sorted into three main groups (listed above). All answers to the questions you should write down the card, you always knew and was aware of the reasons for failure. Trading Plan is mainly used for the preparation of an appropriate plan for trading, you should stick to in order to increase the probability of profitable trades. Remember that the market is volatile, and therefore from time to time to examine assumptions in the plan, and then adapt them to the changing market.
I propose to prepare, and then use it every day. It is, in fact, read your Trading Plan especially at a time when daily gains reinforces the belief of self-righteousness!
Keep in mind that the market is trying to very many people. Only a few are successful. What you're better than others? What are the qualities of character, personality, makes you potentially more likely than others?
- Are you able to take care of Trading and take it as a major professional work? Is Trading will be your only addition, a reaction to the personal, professional?
- How will you cope with stress, emotions, failures occurring during the investment?
- How will your position trading business? Are you able to adjust the trading business place to meet your expectations?
- How long does it intend to devote to trading: during the day, week, month, etc.?
- Ask yourself the question: what trader would be one or two months, six months, one year, two years, five years? The question is not here the size of its profits
- Write down good and a bad side: focus, among others, to:
- of confidence / decisions
- be patient
- by discipline
- the organizational skills
- about motivation
- the ability to use the computer / software
- the ability to deal with the errors / failures and the way to solve them
Capital management is the most important aspect of trading. Making money is really your main goal in investments listed. Therefore, you should be aware that you should seriously consider how best to establish the principles of risk management and the size of the position you are going to open the stock market investments. In a later article I will explain my money management system but for your trading plan please answer for questions follows:
- Size stop loss'a assumed the position. Do you plan to calculate the amount the / percentage? Is the size of stop loss addicted individual investment strategies?
- What size items going to open? How do you match the size of the managed products to the type of instrument?
- Size of the position / number of shares. What factors addicted size of the opening position? What number of items you can open at any given time? What is the number of items you are able to properly manage it?
- What do you do when you start to lose money? The situation applies to events when closed position (day after day) will bring only losses. Do you have a contingency plan prepared for an emergency?
- How much time you can devote when your investments will not bring profits? What steps do you undertake in the event of termination of a few losses in a row / end of the month for loss / several months without positive results?
- What will you do after completing a few losing positions in a row? Are you planning to take a break at that point? Or maybe you will by all means want to "play" on the market and quickly recover the lost money?
- What limits you enter the number of opened positions, the maximum daily trading?
- Do you have a clearly defined moments and prezycyjne open position? Do you have a clearly defined policy of getting out of losing positions?
- How do I plan to pursue profits? How do you chose the level of Take Profit?
Prepare an appropriate trading strategy from start to finish makes it perfect you know your style of trading. That is why you have it defined in any situation that the investment can take place. It also asked you the following questions:
- How are you going to look for signals on the open position? Do you plan to play at one of the market? Or maybe you searched the various financial markets, in order to find the appropriate signals to the opening position?
- Do you use technical analysis or fundamental analysis? What kind of knowledge in this field have?
- What indicators are going to use in trading? What formation are going to look on the charts? How do you plan be searched and used to profile the trading business strategy?
- Are you planning to open position when the pattern is just being created? Or when there is the confirmation?
- Are you going to keep a trading diary? How are you going to drive it? What data will be enrolled and analyzed?
- Which tool you want to use when trading?
- Are you prepared any alternative solutions: when the item possessed profitable if you plan to get out of it at a profit / loss? When suddenly changes dramatically the situation on the market?
These questions are very important in the process of preparing the Trading Plan. But the really big question I left at the very end:
Will you be able to achieve its objectives? Establishing the rules is one thing, but their use in practice is another matter! Does the session will not change pre-defined rules?
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