There have been many people who have tried to make a living from trading. Some have been successful, others have not. What is the different between the person who is able to accomplish their trading goals and one that is unable. Is it the stocks they are trading? The size and amount of risk a trader takes? Is there a golden rule or secrete that propels a trade to success? From my own experience and reading different articles about successful traders, the number one reason that separates a successful trader from one that is not is a PLAN.
A detail trading plan to be more specific, a plan that lays out guidelines and describes actions that are to be taken once opportunity/edge has been identified in the markets.( but this is only half the picture). I know many people who claim to have a plan but are not able to take consistent money out of the markets. So this bares the questions. What is a complete trading plan? Would any trading plan work so you can make a living from trading? As you might have guess the answer to the latter is a firm NO. A complete trading plan should provide solutions to all trading decisions a trader will have to make while executing the plan.
A good/complete trading plan should include/cover
Market What type of market best suits the plan
Entries- When to buy or sell
Stops- When to exit
Exits- When to exit winning trades
Position Sizing- proper leverage
Executions Most cost-effective way to implement plan
Expectation- Criteria for judgement of underlying strength of trade idea
As I stated previously having a complete trading plan is only half of what you’ll need to find success in this business. The other half of the equation is developing attributes of a professional trader. Discipline and consistent are very important, which in turn will create confidence. This confidence is important so that the trader will follow the rules/guidelines outlined by the trading plan even during period or streaks of losing trades. Having a complete trading plan will allow the trader to re-focus on the fundamental concept that creates the edge in the markets; which will also help assist the trader in overcome short-term emotional struggles that could arise from losing periods. Point blank a trader must have/develop the confidence and discipline to consistently apply the rules of the trading plan, once this is accomplished they will find success as a trader.
