Why is it important to have a trading plan?
- Is your strategy planned well in advance?
- Do you isolate yourself from the opinions of others?
- Do have a set of criteria that must be met before you buy?
- Do have well thought out and tested rules for when to sell?
- Why have a strategy?
- Most don’t.
- Removes subjectivity.
- Allows diversification.
- Most are available for free.
- Be invested.
- Select your investment universe (either markets or stocks)
- Appropriate account size (capital that you can afford and allow for diversification).
- Have an entry rule (eg. 21 day break out)
- Add risk management parameters stop loss (fixed dollar, trailing, swing)
- How much to risk ( % based on capital)
- Back test the system as well as forward testing
- Performance measurement
- Determine your expectations
- Determine your necessary requirements (resources to get the job done)
- When should I start trading (paper trading first)
- I will not trade on open
- I will not trade on tips from others
- I will not hold a position past 8pm – no matter what.
