If you’re serious about trading, perhaps the best thing you can do is to develop a consistent trading plan. Most traders ignore this, but without one, you might as well be guessing. A good plan keeps your emotions in check, lets you manage risk, and provides you with an improved chance at long-term success.
This is how you can create a good trading plan that will work for you.
Understand Why You’re Trading
The first thing to do is to ask yourself this question: Why am I trading? To earn extra income? To create wealth in the long run? To switch careers? Your why determines your strategy. Once you know what you want, your decisions become clear and focused.
You also have a strong “why” that drives you when the market is challenging. You don’t question your system.
Select a Trading Style That Suits Your Lifestyle
There are plenty of methods of trading, i.e., day trading, swing trading, position trading, etc. You have to select a style that suits your daily routine, energy levels, and risk appetite.
If you work full-time, day trading might not be your cup of coffee. Swing trading, on the other hand, allows you to keep positions overnight and allows you time to study the market after the end of your working day. Whatever style of trading you pursue, be consistent.
Learn the Basics of Market Structure
Read on key principles like trends, support, resistance, and market cycles. Supply and demand trading is one of the ways you’re going to see over and over again and is employed to identify probable price reversals and strong levels.
The method will enable you to think like a big institution. Where they buy or sell is what you want to see, and once you have that knowledge, your entries are more correct.
Create Specific Entry and Exit Rules
You need to decide exactly when you are going to get in and out of a trade. This could be on the basis of chart patterns, price action, or indicators. For example, “I will get in when the price is at a demand zone and there is a bullish engulfing candle.”
You should plan when to cut your losses or lock in profits in advance. This helps you avoid holding onto losing trades and killing your account.
Practice Risk Management Every Time
Decide how much you’re willing to lose on each trade. A good rule of thumb is to not risk more than 1% of your account on a given trade. This will prevent you from being blown out by a series of losing trades.
Employ stop-loss orders to limit your loss. Don’t skip this step.
Backtest and Demo Trade First
Practice your trading plan with historical data prior to risking real capital. Try to see how it will perform under different market conditions. Practice for a few weeks or so with a demo account, lastly.
The majority of prop firm Philippines traders do exactly the same thing. Prop firms usually require you to show them consistency first before they fund you, and having a tried-and-true plan is what makes you stand out.
Wrapping Up
A systematic trading plan provides you with form and organization. It will serve to prepare you in times of uncertainty and prevent unnecessary stimulation of emotion when things do go wrong. Keep it basic. Stay the course. Clarify as you go. That’s how you develop into a guessless pro.