"The most important element of a Master Trader is having a Trading Plan. Amateur
traders have trouble making entry or exit decisions; they are totally confused because
they really don't know what they are doing. They do not have a plan and a set of rules
to guide them. And when they make a decision they are often wrong!"
By Jay Lakhani
Author and Trader
Creating a Winning Trading Plan.
A trading plan is perhaps the most overlooked trader's tool. As a matter of fact the majority
of traders do not have a trading plan. No wonder 90% of traders lose money. Many people
are just too lazy to sit down and draw a plan. In fact 50% of you reading this may NEVER
sit down to write a plan.
Once you have written a plan, you must have belief that your plan will work, otherwise
there will be no discipline to follow it. Discipline is the key to succeed in Trading, just
because you have a trading plan does not mean that success is assured, but without a plan
you are likely to fail.
I always say to my students, that when you write a plan, write it as if your trading plan will
be scrutinised by your boss and that your job will depend on it. Be very detailed and
realistic in your plan, often I have seen that people are seeking to gain 500% return on
investment on a monthly basis! This is unrealistic, even allowing for a 100:1 leverage!
Also many traders have so many strategies and countless indicators to work on, this leads
to indecision and confusion Analysis Paralysis. You must limit your strategies to a
So what is a strategy? These are absolute set of rules which you follow each and every time
you see a setup or a chart pattern, so your golden rule should be No Signal No Trade!
You must have sound money management rules, because this will ensure success. You have
to define acceptable loss, identify your entry and exit levels, and carefully calculate your
risk/reward ratio. Sound money management principles will help you to minimise your
losses, maximise your gains and keep you in the game
Trading the markets should be treated like a business; it does not matter whether you
trade full time or part time. Just as a business has pans and goals so should you as a
Trader. You need to define your goals, identify your expenditure and lay out your trading
strategies that you will use to reach these goals.
Your trading plan must be followed with absolute discipline in order to succeed. The trading
plan should be tailored to suit your personality, ability and resources. It should be YOUR
plan and unique to your style of trading.
I will go through a template that I use as part of training Forex traders.
Your answers should not be vague and a simple one liner. The more you expand with
relevant information, the more it will help you in your trading.
There is no room for ambiguity in your plan. Also where possible, always define and qualify
This usually means posing questions what, when, where, why or how.
For example if you were trading the EUR. Why the EUR and not Cable?
What are the components of a good trading plan?
1. Have you got the skills to be a Trader?
2. Mental preparation - how do you prepare mentally to trade?
3. Set risk level your attitude to risk
4. Set goals what targets do you intend to achieve
5. What research and homework you do before entry and exit? Do you have a reason to
6. Your entry and exit rules have discipline to stick to your rules
7. You should review your day, week, month and year write your conclusions in your
8. Record keeping you should be able to compute your financial accounts, showing your
9. Trading journal? Do you keep a record of all your trades? With reasons?
Quality questions will lead to a good trading plan
"A major stimulant to creative thinking is focused questions . There is something about a
well-worded question that often penetrates to the heart of the matter and triggers new
ideas and insights."
Brian Tracy .
You passed a major hurdle, when you made a decision to create a trading plan. This is an
important step in itself.
In order to create a winning trading plan, countless hours must be spend on planning itself.
Planning is made easier if you are focussed, and motivated. This will come with quality
questions; as a result you will get quality answers. If you ask you shall receive.
Your business as a Forex trader will succeed, only if ask the right questions about markets
and strategies, and learn from it.
" He who asks a question is a fool for five minutes; one who does not ask a question
remains a fool forever." Chinese Proverb.
The human brain is the most powerful computer and no machines can ever replace it, yet
sadly we do not use it to its full capacity. If you are not doing well as a trader than what
question will you ask yourself? The answer of which will determine your future!
For example you could ask, what plan of action do I need in order to achieve my ultimate
goal of financial freedom through trading? The question you will ask will determine where
you focus, how you think, what are your feelings, and what will you do?
One trader I mentored recently asked a quality question, how could I succeed while 90% of
traders are failing? How can I turn it around? He asked this question with great intensity
and expectation. He went about writing a book for himself on a trading plan, using the
detailed template in the Bindal FX home study manual (www.4x4u.net). The end result was
a 100-page trading plan document. This trader has not looked back! It all started from a
focussed quality questions. Quantity is not important, but what is important is the
relevance of information in your plan.
Many traders want to achieve financial freedom, being their own boss, than why don't you
get leverage: ask yourself, " If I don't become a master trader, what price will I have to
pay, what will it cost me in the long run and what impact it will have on my life? " and "
How will my life be transformed, if I get this right?
I do hope that this will get your brains ticking......... I will now go through a trading plan
template; your plan may include the following;
TRADERS BUSINESS PLAN
For the 12 months Ending 31 st December 2005
Any Company Investments Limited
20th December 2004.
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