Why Every Trader Needs a Trading Plan
Even though the concept of plan has been established and acknowledged by everyone in every sphere of life, trading plan has always been in a neglected corner. This is why most of the traders have no plan. The reason behind this are as follows, it is because traders think that planning is a tedious and boring job, most traders do not know how to devise a plan, and the necessity of a trading plan has always been deemed unimportant or because the traders think that they already have a plan in their mind. As trading is a kind of business, it requires a good plan in order to make money and to succeed.
We always have to consider about devising a plan as they are needed in taking crucial decisions and in changing business strategies. The very first step in devising a plan for trading is defining the goals and objectives of an individual. The first step is the most difficult step for most of the traders because it requires the answer to a very simple question- what is the reason behind trading or why does that particular individual trade. However, if the reason is ambiguous, they would not be taken seriously. In order to devise an effective plan, one has to find the answer to questions such as the reason behind what kind of market is the best for trading for a particular individual, what matters should be considered in trading, what should be used to measure progress etc.
It is also needed to consider your strengths and weaknesses in making a plan. Making a target will help one to define progress. Also, it helps to measure one’s performance that in turn helps to attain one’s goals and adjectives. It also helps to plan strategies in order to overcome the shortcomings of a plan. There are always risks associated with trading. These risks can hamper both the short term objectives as well as long term objectives. There are countless risks associated, the risk of shortage of fund, the risk of strained decisions, the risk of mismanagement in capital and so forth. Effecting plans in trade help to point out the associated risks and help and individual to be prepared for such risks.
These plans help traders to become self-reliant. Plans can be either daily micro plans or master trade plans. The micro plans are those that help to ensure safest return with the least amount of risk on every individual trading where as master trading plans usually encompasses of plans that are made in advance with a set goal in mind for a number of trading.