So many traders treat trading like a hobby, placing trades arbitrarily without thought to how much they want to make, how many trades they need to place to make positive cash flow. I think traders desperately want to make a quick buck so much so, that the idea of having to put in actual work seems counter intuitive. Traders I have trained understand the importance of using a trading plan but very few ever use it. Is there a correlation between successful traders and their use of a trading plan? Yes there is, ALL successful traders trade with a plan and journal their trades, albeit to varying degrees of detail.
Here are some of the Advantages of using a Trading Plan
Now that we know we need a plan, how do we come up with a good trading plan? A good trading plan should cover the following areas:
These two areas are very important. Traders tend to not want to consider the risk. They believe a good trader is one who doesn’t take any losses. I can tell you first hand that I have had many months of consecutive losses but one thing I have learnt is how to not blow an account during these drawdown periods. This is because I always think in terms of risk. All my trading decisions consider risk first before considering potential profit. Always remember that Profit is not guaranteed no matter how great the setup, the trading plan or the preparation.
Having put together a great plan that you feel you will be able to follow, the next thing you need to do is follow the plan. The only way you can follow the plan is to record your actual trading results. This means using a trading journal.
In summary the purpose of a trading journal is to:
Note: a high frequency of trades does not mean higher profit potential. You could make all your profit from just 2 trades a week.
A TRADE JOURNAL IS BY FAR THE MOST IMPORTANT TEMPLATE YOU WILL USE AS A TRADER! It tracks everything! Here are the things that must be captured and recorded after each and every trade
Below is an extract of my trading journal.
By registering and attending for our courses your understand that 1) trading is risky and 2) The Forex Trading School is not licensed to give trading advice or to trade on anyones behalf, we are just educators. Read the full disclaimer and terms.
© 2019 - The Forex Trading School Africa. All Rights Reserved.