Here are the seven steps in creating your trade plan:
- Learn From Others that Have Strategies that Work
My monthly trade came from a book I read and my O DTE Trade came from another FB member. When I discovered the monthly trade, I felt that I had finally found my strategy and traded it exclusively.
- Test it Yourself with Small Trades
Testing small with real money is important. It’s important because your psychological attachment to money controls 90% for how you think and feel about a trade. Trading small lessens that attachment and allows you to make decisions based on real data and not your emotions. But the emotion is still there and enough for you to build habits with part of the emotion present
- Tweak it and Allow it to Become Consistent
Once you see that trading small brings consistency, you will find areas that need improvement. As time passes you will take losses and make mistakes. Determine what went right and what went wrong, and note those as they will eventually end up in your trade plan.
- Now You are Ready to Write a Trade Plan
Now that you have something, write all of the details down. Your trade plan should contain the following:
- Entry/Take Profit/Stop Loss Rules
- Risk/Reward Numbers
- Margin Requirements
- Risk Management Rules
- Rules That Must Never be Broken
- Weekly/Monthly Account Growth Target
- Pre-market and Post-market Routines
- Gradually Trade Bigger
Do this little by little… If you have a losing day, scale back until you are profitable for three days in a row. This very important as everything that is inside you will want to make up for the loss. I have done this and lost my account. It is common. Fight the urge and scale back!
- Build Confidence and Trade Often
Make no mistake; practice does make perfect! Don’t allow yourself to trade other strategies. Perfect one at a time and you will get better and better at it. There is no difference than gaining experience in a career. Trading is a profession and you must treat it that way.
- Tweak You Plan as You Experience Market Changes
Your trade must be able to work in bull and bear markets and you will encounter changes to your trade over the long run as in years. You must update your trade plan as this occurs. What you will notice is that the Risk Management part of your plan will evolve into something much more risk averse than when you started. So in the end, you will make a little less on each trade but your win/loss ratio will increase dramatically.
There you have it.. The seven steps to a Trade Plan that will transition your trading from a hobby to a profession!
Founder | SimpleOptionStrategies.com
P.S. I have a ton of free instructional videos describing the details of my live trades. You can find the all of them by clicking on my YouTube channel. And be sure to subscribe since I am always putting new videos out there!