The importance of the trading plan in the trader's success: Reflections and advice from personal experience

josevas217 (79)CO [Admin]in Steem Alliance • 7 months ago

A big greeting friends of Steem Alliance, a pleasure to be here again, I hope the content I bring you today will be of interest and add value to you in some way.

Today I would like to talk about trading plan and the great importance that this aspect has in the success of those who are professionally engaged in this business.

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Let's start by defining what a trading plan is, and this can be seen as a document where we have in detail the strategy and the rules that as a trader we will follow at the time of operating in any financial market.

This document must have the aspects that will be the trader's guide, starting by having very clear which are the objectives, for example, the limit of losses that can be tolerated, as well as the financial horizon, that is to say, just as we define a maximum level of losses we must also do it with the profits.

This "limiting profits " seems to make no sense, but not having a specific percentage of profits makes greed enter the game, and this is what makes that many times people who are in profits in a trade end up losing, because they do not dare to make profits. This has particularly happened to me, and I learned it the hard way, which has made me now work on the basis of maximum percentages of losses or profits.

The trading plan is your friend

Moving on to another important aspect of the Trading Plan we have the strategy itself, this can include technical analysis, fundamental analysis, or a combination of both. In my case, I usually use a combination of fundamental analysis, which is the analysis of news and how they may be affecting the market, as well as technical analysis. That will logically determine the moment of entry as well as the exit of the operation.

On the other hand, and of utmost importance is the Risk Management, this is closely related to the way in which we manage the operation, proper placement of the StopLoss, and we could even add at this point the diversification of the assets that we operate. In particular, I trade cryptocurrencies, but I focus my attention more on trading American indices. Generally, when cryptocurrencies go up, indices tend to go down, it is a way to diversify and minimize risks.

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It is somewhat complicated when we start in the world of trading to define a Time horizon, but it is necessary, this refers to the temporality that we will use to perform the analysis, because this will also define the duration of our operations, as well as the type of trader we are.

It is not the same to be a scalper, who work in a timeframe of minutes, or to be a day trader, whose operations are usually between minutes or hours, or to be a swing trader, whose operations will remain open for days and even weeks.

And something very important, which also cost me to understand and execute, is to keep track of what we as traders do, it is necessary to make monitoring and adjustment of our trading plan. It is logical that when we create our plan we do it based on a reality, and this may vary. Keeping a trading diary is a good tool to evaluate the process and know if we should change something.

_{My trading diary, photo of my authorship, taken with my Samsung A21s phone.}

For example, writing down what we have done, why we made a purchase or a sale, how we feel about it, will allow us over time to better analyze our performance and thus, improve what is necessary. It has also worked for me, and the highly profitable traders I know do it, so I think it is a good tool.

Conclusion

Trading is a commercial activity that requires training, preparation, and the points I have shared in this post are part of the things I have been able to learn during this year in my education process with other traders who have more experience. Just as one goes to a university to be trained in a career, it is good to know that becoming a profitable trader usually takes time, and requires a lot of organization on our part.

I hope this content is of value to you who read it. Any questions, doubts or suggestions, you can leave them in the comments and I will gladly attend to them. Have a great end of the year, and may 2024 be special for everyone.