Capital Management and Trading Plan - Crypto Academy | by @b-naj / S4W8 - Homework post for @ lenonmc21

b-naj (67)Beginner[9]in SteemitCryptoAcademy • 3 years ago

Warm greetings from @b-naj to prof @lenonmc21, and fellow steemians out there.
I am very much excited to partake in my very 1st beginners' course assignment and can't wait to get my remark. Presenting assignment on "Capital Management" and "Trading Plan" in my own words and to the best of my knowledge, after taking prof @lenonmc21's class.

THEORY

Define and Explain in detail in your own words, what is a "Trading Plan"?

Carefully outlining all significant steps in order to attain the best suitable outcome from actions taken during a trading operation (be it "to buy" or "to sell"), is without doubt termed a "Trading Plan".

A trading plan comprises of a set of rules that helps in the governing and execution of specific/crucial operations during the application of strategic actions in the market while trading, so as to give investors a much more comforting hold/control over their invested capital.

Strategies taken will differ with respect to the capital provided by the investor, and the amount willingly subjected for a potential loss per operation. It is advisable to let an action end if all of the aspects which were initially setup failed.

Explain in your own words why it is essential in this profession to have a "Trading Plan"?

It is important to note that trading plans differ with investors, and influenced by capital made available, alongside the amount set aside for potential losses per operation.

The easily assimilated steps of a trading plan works perfectly with a large majority of investors, and as such, you necessarily not need to create a very complex trading plan. Even with the simplified setup, you can still achieve your goal.

Trading plans helps prepare steps to ease your actions as your progress through daily operations to achieve your goal.

• It helps minimise the risk of a much greater loss
• It provides followup actions after a progressive operation comes to an ends.
• It results in possible awareness on when to close an operation.
• Overall, it helps investors decide on when to take an action (either buy or sell).
• It creates a conducive/convincing atmosphere for an invested capital.
• It creates assurance for a safe management of invested capital.

Explain and define in detail each of the fundamental elements of a "Trading Plan"

The 4 fundamental elements of a Trading Plan are:
Risk Management.
Capital Management.
Trading Psychology.
Planing and Control.

Risk Management:

This is of great necessity as it records all the wins and losses during operations carried out in the market. This act is very important for any profitable investor, since it keeps track of profits made by making sure that the total amounts lost does not surpass the total amounts won, after a total sum up. This element is very important to ensure profit, since losses are in evitable in this line of business; the key here is to make sure the winning surpasses the losses.

**Here i an example:
Given that I make a total of entry of 6 weekly in the market. So as not to experience an overall loss, i intend making a maximum of 6 entries a win, and a maximum of 3 entries from the 6 entries a lose.
If i win 6 trades, i stop trading for the day. Similarly, if i lose 3, i stop trading for the day, until the next day.

Capital Management:

Capital management conveys with the control/monitoring of invested capital.
This process is achieved by risking a certain percentage of the said capital, which is considered to be the trading capital for each operation once an action is taken (either buy or sell).

It is important to point out that nothing in this profession is certain, the whole process is a risk, a good investor is said to be the one who takes strategic decisions wisely.

Capital management helps us take decisions on how much percentage of our capital we are willing to risk during an operation.

Here is an example:

1) Percentage of losses:
This refer to the percentage that is subjected to a potential lose per operation. It is advisable for a newbie in this profession to start off with a 1% risk of their capital used for an operation. So, for $1500, they shall be risking $1.5.

2) Profit Percentage:
Profit percentage refer to that portion of the operating capital which is intended to be realised as a gain. It is important to The ideal is that, starting, we seek to be able to set your profit percentage at a minimum of 1% (same value as your lose percentage).

It is important to note that the whole idea is to obtain profit.

To maximize results, one can use an operating strategy with minimum ratio of 2:1 for profit and loss percentage respectively. You can even step it up to 3:1 to maximize the outcome.

3) Days of operation:
This deal solely with the time schedule and degree of commitment to work, in order to achieve the goals set. This differs with respect to the goals set.

Trading Psychology:

This element is much more efficient only during a real market operation, since demo operations on practice accounts tend to take away actual decisions one would narrowly take when risking his or her invested capital. As such, it is quite needless to apply such an element with a demo account.
Nonetheless, Psychology is very vital when involved with teal invested capital. If an investor achieves the goal set for a day, he will withdraw for that day and wait for the next day, but with a demo account, he will keep operating since it is not actual money. Combining this element with the others, creates a perfect Trading Plan.

This fundamental element helps a profitable investor come up with great points to take into consideration during an operation, so as to keep emotions in check.

• Do not disregard the daily strategies set no matter how well or how bad your entries were.
• Do not start an operation on the market if your mind is divided or occupied with disturbing thoughts.
• Morning sessions are the most favorable period to trade.

Planning and control:

To plan and control an investing account, an investor simply needs to keep a close record/update of his monthly capital and returns from operations. The amount of invested capital increases monthly, an as such, profit also increases with month.
It is best to create a logarithm sheet that keeps track of how your progress ought to look like when you fill in all strategies and fundamental elements. This also helps eradicate the obstructions caused by emotions.

CONCLUSION

Before the creation of this assignment, i was clueless on wat a "Trading Plan" is. Now, i can proudly say i have a good mastery of the whole concept and can manage my capital within the market much better.