You must remember that the trading plan will change with the market conditions and even though you must follow what is written (as it is a plan) just like it was written in stone, as the trading day ends, you should re-evaluate the plan and make necessary adjustments, if needed.

Developing the perfect trading plan that will work for you entails 10 key points.  Actually, you can consider this your Master Plan, as changes may be necessary and the market changes.  Those 10 key points are:

1. Assess Your Skills.  Are you ready to start trading?  If so, are you a seasoned trader or just a beginner?  It is great to have confidence in this game; however, confidence while lacking skill, will only hinder the results.  Traders who are successful have a plan and they follow that plan, raking in profits from those who are not as prepared.  So, where do you lie in this scenario?
2. Are you mentally prepared?  We learned last week about the psychology of trading and how one should be prepared mentally.  Have you done your research on this subject?  Can you handle the pressure?
3. Set the risk level.  How much are you prepared to lose?  This point must be well defined in your trading plan.  How much of your portfolio are you ready to invest in a given trading day?  Most of the time, traders choose between 1-5%.  The key here is that any time during a given trading day, you happen to hit the mark that you have set for loss, you get out right then.  There should be no waiting to see what will happen.
4. What’s your goal?  Just like setting your risk level, you should also set a goal for profit.  At what point would you consider that you have gained enough profit to get out?  Most investors set their goals for three times the risk level.  For example, if you won’t take more than a $1 dollar per share loss on your investment, then your profit goal should be $3 per share.
5. Research.  Before making any type of a trade, you should first do your homework and see what is going on around the world.  World situations actually affect the markets and can have an impact on what the trading day will be like.  You should trade on probability; don’t gamble.  If waiting on a report to be made public is necessary, then wait on it.
6. Preparation.  Before the trading day begins, reboot your computer to get a fresh start.  Depending upon the trading program, if any, that you may be using, you might have to reset alert signals for entry and exit, etc.  Eliminate any distractions during the trading day.
7. Make sure to observe your exit rules.  If you are only willing to lose $1 per share, then make sure that when the trade hits that point that you get out.  Trading is a game, you are not going to win all the time.  With that being said, don’t take losing personally.  Everyone has to take a loss at sometime; don’t gamble by staying in, who knows you just might lose more money by doing so.  Set these parameters before even entering a trade.
8. Set entry Rules.  At what point do you want to enter the trade?  Of course, the point is to enter low and exit high; however, how low must it be before you will enter?  Watch for the signals to enter at your set point and don’t let your feelings or apprehensions get in the way.
9. Keep accurate records.  If you were successful at a trade, you will want to know how you did it so that you can do it again.  Keeping records of your trades will help you to research your efforts and help you to become a better trader by revealing your habits, whether good or bad.
10. At the end of the trading day, always add up your profits and losses.  This is a must for keeping accurate records as well.  It will also let you know where you stand.

You can find trading plan templates available for download on the Internet that can help you with the development of your perfect trading plan. If you have any questions past what is mentioned here, feel free to contact us, Locus Capital, as we are always glad to help.

Locus Capital, LLC offers a variety of different services to their customers.  There are several different levels of education courses available.  The beginner course teaches the market basics, while the advanced course introduces advanced trading concepts and more in depth technical analysis.

Through their website, you can find more information about the wide variety of services that Locus Capital, LLC has to offer pertaining to both day trading and swing trading.  If you would like to learn more about this subject or if you would like to be able to trade with more leverage, Locus Capital, LLC is here to help.

Most of the new and inexperienced traders get familiar with a negative aspect of trading.  Their goal is to minimize negative impact on traders, and maximize the positive side.