10 steps to building a winning trading plan

Click here to Enjoy Live SHARE MARKET Commentary and for NSE & MCX

10 Steps To Building A Winning Trading Plan

Investment trading is an industry that demands meticulous planning. Experts have opined that traders who deal in the financial market without a proper plan are invariably heading towards a huge loss. This is a reality that or a thumb rule that is followed by all the successful traders.

Let us take a look at some of the basic rules that must be kept intact and followed meticulously for a successful business in the market of financial trading.

Have a Written Plan
This is the first rule that is overlooked by many and they invariably cut a rather sorry figure at the market. Hence to begin with you must carefully plan all your trading and investments that are to be carried out for the day. It's best that you do go through your written pans more than once before the market open.s A good trader will follow the plan step by step. At the end of the day on the basis of the results, the plan is to be revised for the next day.

Step Out If Not Emotionally Balanced
The market for trading is a highly competitive one. If you somehow feel that theta you are not in your best of shapes then you must not get to the market for the day. This is because close observation and attention are required so that you can reap the best profits from the opportunities of the market. However if your concentration wavers there is every chance that you will create a mess for your self and your losses can mount really high.

Set Realistic Targets
At the end of the day keep a realistic target for yourself. In case you do keep a very high target there is every chance that you will end up having a large number of losses instead.

Exit Rules
You must be ready to leave the market when the time is right. This time could be the generation of losses or even the creation of the required and the set profits and wins. You must not trade in the market after a certain point as this can increase your fatigue, waver concentration and result in a fall in your performance.

Entry Rules
As compared to exit rules, the entry rules are a little less important. However, you must enter the market at the right time when the opportunities of the market are right so that you can trade in the best possible manner.

Homework
This is a very important aspect and will include the study of a large number of factors. You must not only make a good study of the companies whose stocks and shares you are buying but also the external factors that can affect the prices or the rates of the shares and stocks in the final market.

Preparations
You must make ample preparations for the day’s trade. This will ensure that all your signals will be clear and easy to follow for your teams and hence your entire group can operate as a single unit. This can result in effective buying and selling of shares.

Risk Levels
There has to be a certain level till which you will be taking risks. Let's say that for every day you must set a certain percentage of your portfolio that can be risked safely. In case you do lose the amount you must be prepared to exit the trade market for the day. In case of this rule is not followed trading can turn into a gamble that can yield a huge amount of losses.

Records
It is imperative that you must keep a good record of all the companies and their share prices as it existed for the day. A continued maintenance of such records can help you to understand the pulse and the pattern of the market.

Analysis
It is imperative that you must analyze your business trends for the day and the way the market has behaved. This will help you to realize your strengths and weaknesses and hence prepare better for the next day.
On a final note, it can be said that trading is a business with its own risk. Hence the business has its own rules of safety. Play by them for the continued and maximum benefit.

For more articles click here