Use Smart Planning to Improve Your Trading Results

Many people join trading on a wave of excitement, hoping that smart trading plan results will follow. They hear that gold has reached a new record high, that a company’s stock is doing incredibly well, or that a currency pair’s exchange rate is growing by the day. They think, “Why don’t I join in on the action?”

And joining while the excitement still lasts, they often do find some initial result, riding that uncommon market wave. They may even believe their impeccable instinct is what allowed them to find that opportunity. “I may be good at this trading thing”, they think, and start trying to find results on a hunch.

That’s often when reality sets in. Trading isn’t easy, and if you want to do it long-term, your instincts won’t cut it. You need a plan.

Why a Trading Plan is Necessary

A trading plan has two primary advantages: solidifying your routine to eliminate randomness and making your routine much more efficient. Following a smart trading plan results in more consistent decision-making and reduces the reliance on chance or luck.

Essentially, it lets you at least approximately know what you are going to do before you even sit down to trade. You don’t have to browse multiple news sites, repeatedly learn new market mechanics, or rely on rare occurrences. You can always sit down and find something to do without much effort.

Note that this doesn’t apply to everyone. If you are someone who just wants to hop on when you hear a market is surging, that’s completely fine. But if you want to trade regularly, the likelihood of you having acceptable results without taking a structured approach is minimal.

Trading Plan Prerequisites

If you are considering devising a trading plan, you’ll need the proper knowledge to do so. This means familiarising yourself with basic trading concepts. You don’t have to be a trading master, but trying to devise a plan without really knowing what’s going on is not much better than just guessing. Proper preparation is essential for smart trading plan results.

Here’s a quick rundown of the concepts you should be familiar with:

• Basic economic principles – scarcity, supply and demand, opportunity cost
• Market structure – trading sessions, liquidity, spreads, volatility
• Asset classes – stocks, forex, commodities, indices
• Technical analysis basics – trends, support and resistance, indicators
• Fundamental analysis basics – earnings, interest rates, economic data
• Market psychology – fear, greed, herd behaviour, confirmation bias
• Timeframes – scalping vs day trading vs swing vs long-term investing
• Trading costs – commissions, swaps/rollover fees, slippage
• Trading platform features – charting tools, order management, alerts, execution settings

This list may seem fairly overwhelming. However, understanding these concepts is crucial. With consistent study and practice, you can start to see smart trading plan results that improve both your confidence and performance.

Once you have grasped these, you’ll be able to find a proper footing on the market and start devising your plan.

Your Trading Plan

Your instincts may tell you to start searching for the ‘best’ plan immediately to find the best results. Unfortunately, there is no such thing as the best trading plan.

Each plan should be highly personal, tailored to your interests, preferences, and life circumstances. Developing your own strategy is the key to seeing smart trading plan results in real trading.

In the following sections, we will discuss what goes into a trading plan and how you can devise your plan to fit your needs.

When Will You Trade? Achieving Smart Trading Plan Results

An often neglected aspect of trading is the way different assets behave during different times of day. As such, you need to take your own schedule into account. It’s advisable to trade when you’re well-rested, free of distractions, and able to go through your session with minimal interruptions.

Following a structured approach can help you achieve smart trading plan results by aligning your trading times with your optimal performance.

Next, when you decide on a window that’s convenient for you, you can see which instruments are available and behave acceptably in that period. If there is an instrument you are really interested in that doesn’t match up, you can modify your hours slightly, but your own mental state is your biggest tool in trading; don’t break it just to chase an asset you like.

Choosing Your Instruments for Smart Trading Plan Results

Once you’ve decided when you’ll trade, the next logical question is what you’ll trade. Here, some traders decide they want to trade forex, but for beginners, that’s not specific enough. Understanding your choices carefully is essential if you want smart trading plan results and consistent progress.

Taking the forex market as an example, each currency functions differently. If you’re a beginner, trying to wrap your head around them all will likely just prevent you from understanding the underlying mechanisms and gaining deep knowledge. Being a jack of all trades doesn’t cut it in trading; the vast majority of traders fail. You need to become a master.

Choosing two to five instruments should suffice for beginners. The great thing about forex and CFDs is that you can easily trade both upward and downward markets, preventing you from being locked out of trades because all of your instruments are bearish.

Finally, consider diversification. If all your instruments behave similarly and react to similar events, you’ll still be able to trade, but you may encounter a trading environment you aren’t comfortable with. Picking a safe haven like gold, a forex currency, and a company share, for example, gives you much more flexibility.

Your Style and Strategy for Smart Trading Plan Results

Here, you need to decide how you’ll trade. The first component of that is whether you are looking to make short, medium, or long-term trades. In general, if you are more analytical, you’ll choose long-term trades, since the brunt of the work in that case is analysing the market rather than placing the trades.

More active traders, of course, will choose the shorter-term, as it relies more on making snap decisions. Taking these decisions carefully is essential for achieving smart trading plan results.

Next is your preferred analytical style. In broad strokes, phân tích kỹ thuật is more fitting for shorter-term traders, and fundamental analysis focuses on the long term. However, it’s always wise to apply at least some mix of these two, and never completely neglect one or the other.

Finally, there’s your trading strategy, which outlines the specific steps you are looking to take. This involves:

• Market conditions you trade – trending, ranging, high or low volatility, liquidity level, spreads
• Setup requirements – specific patterns, indicators, or price behaviors
• Entry rules – exact conditions that trigger a trade
• Exit rules – exact conditions that decide when you consider a trade won or lost and close it
• Invalidation criteria – conditions that cancel a setup before entry

Once you get through everything we’ve discussed so far, you’re nearly prepared to start trading. There is, however, one more vital component.

Risk Management

In trading, knowing how to lose gracefully is just as important as knowing how to win. That’s where most traders fail, as they get stuck in a limbo of big wins followed by a series of losses.

Risk management consists of:

• Recognising and preventing emotional trading
• Proper position sizing
• Setting proper stop losses
• Maximum daily, weekly, and monthly losses
• Knowing when to stop trading

For most new traders, limiting losses is a much quicker way to improve results than optimising wins. As such, risk management is perhaps the most crucial skill to learn.

Reviewing Your Plan

Finally, there’s the matter of improving over time. This starts with recording your performance. Keep a trading journal that records your trades: why you entered them, why you exited, which part of your strategy they matched, and how you felt before, during, and after them.

Schedule weekly and monthly reviews of your journal and trading history. This will allow you to see patterns, find what you’re good at, and where your performance is lacking. Work on your issues, emphasise your strong points, and the results will speak for themselves.

DISCLAIMER: This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication.