Your Trading Plan |
Your trading plan should be based around your investment objectives, your personality |
and your starting capital. Trading is different for everyone and it is important to have |
a plan that is realistic and re ects your unique personality and circumstances. |
Constructing & Implementing Your Trading Plan: |
Do Your Homework |
It is rst essential to learn the basics, how and why markets move and research |
a method that you are comfortable with to trade: ie one that is based on sound |
methodology, and one you can trade with con dence, and discipline. So before you |
start to trade make sure you have good background knowledge on all aspects of |
trading. You would not try and y without lessons, and the same is true of trading |
currencies. If you trade and “shoot from the hip”, or on tips from friends, and stories |
in the nancial press, you are almost certainly going to end up a loser over time. |
Match Your Method To Your Personality |
Should be one you have decided you have |
con dence in and can implement with discipline. |
This may sound obvious, but many traders |
trade in a way that is totally opposed to their |
personality. For example, if you are impatient |
and hate giving back any pro ts then a long- |
term trend following system is not for you; you |
would probably be better suited to a shorter- |
term swing trading method. |
Begin With A Simple Method |
One fact that remains true is that simple systems |
work best for most traders. There is no link |
between the complexity of a method and how |
successful it is. Another advantage of simple |
systems is they are easy to understand and |
implement and this helps you stay disciplined in |
the face of the inevitable run of losing trades. |
Begin With Suf cient Capital, Trade Small Positions And Diversify |
The utopian dream is to start trading with a small amount of money and make it into |
a fortune in a few months. The reality is this is unlikely to happen to the majority |
who trade. The rst thing to do when trading is start with enough capital to take a |
string of losses. The simple fact is: the less you start with the lower your odds of |
success. It’s a matter of logic. If you are hoping to get on board one big move, it |
may take ten consecutive losses before the winner comes. By then your capital could |
easily be depleted and the move you were hoping for comes without you being able to |
participate. Always start with enough capital to allow you to take a few losses. If you |
can you should hold a few trades in different areas to diversify your positions ie “don’t |
put all your eggs in one basket” and blow your money in one trade. To start with keep your position size small and spread the risk. |
