Trading Plan

Creating a Master Trading Plan

Are the markets really changing, or just your perception of the market?
Creating a master trading plan is your key to success. It’s easy to lose focus when your mind is distracted by thinking in the past or future, which can create negative emotions.

Creating a master plan will help you keep your discipline and trade more consistently when investing money. Every successful business began with a plan or business model and so should yours. If you are in this for the long haul, you better plan for your success.

So how does one begin creating a master trading plan?

Test your theory. Does back testing prove your trading strategies belong in your plan? It’s tempting to try the latest and greatest technique, but not wise. Resist the urge to compete with anyone but yourself. Trading buddies are a huge welcome to an otherwise lonely endeavor. Two eyes are better than one especially when you are following multiple trades. A little competition isn’t bad but the only winner is the one with the growing portfolio. Don’t go outside of your master plan.

Test each strategy in different market conditions. Do some of your strategies work only in specific markets? Identify and organize your various trade setups for each type of market. Invest in a continous trading education and build an arsenal of tools to trade.

If you are a novice trader, stay in your comfort zone initially. Your master plan should not force techniques that are outside of your comfort zone. If you are confused by ‘short sales’ then don’t force the issue. Instead, paper trade short sales until you feel more confident.

Establish your risk management. Set your loss on each individual trade and stick to it! No wishing and hoping when trading in the stock market. You need to control your trading emotions and avoid emotional trading. Basic trading rules prove that acting quickly when a trade is failing will save your portfolio. Anyone knows how to watch profits grow; only the disciplined investor cuts losses fast and keep them small, no one can be right all the time. Don’t become hooked on being ‘right’, instead become hooked on admitting when you’re wrong, and move on to trade another day.

Prepare yourself mentally before starting your day. This is often overlooked but critical to long term success. Much like an athlete, you want to trade in a peak state by trading in a calm state.

Find your trading niche. Trade to your strengths. You may be surprised to learn that your personality is better suited toward certain markets.

Keep a trading Journal. You will be amazed at the valuable information that will unfold before your eyes when you look back on your trading journal. Certain habits are hard to break unless they are recognized. Good habits are often overlooked when they deserve equal attention. It isn’t so much about what you are doing right, or wrong, but observing the obvious. No two stock traders are alike and what works for someone else may simply not work for you. Without a trading journal you are in serous danger of repeating mistakes!

Keep a calendar of important market events. Have you ever gotten excited about an ‘opportunity’ only to find out you jumped in right before earnings? Is there a stock market holiday around the corner? Many of the major players take off, or leave early around market holidays. You could be caught by low volume right when you plan on closing your trade. Stock market calendars are available over the internet and easily printed.

Budget for education and ongoing training. It’s amazing to me that new investors fail to include this in their plan. Do you know of any professional industry that does not insist on continuing education? Investing is serious business. The professional investors never stop learning and neither should you. With the growth of stock market websites there is never a shortage of opportunity to learn. You can learn  lessons from great traders.

Finally, Follow Your  Plan. It is easy to get off track, fall into old behaviors, or give into trading anxiety. The main benefit of making a plan is the confidence you receive, knowing you have carefully researched and planned for success.

 The Genius Trader website provides a variety of free resources to assist you through our Free Newsletter and Free Podcasts. Take advantage of these trading tips and learn to Trade Like a Genius Trader.