Developing and Using a Day Trading Plan
There’s a well-known quote from Benjamin Franklin that relates to many elements of life whether it’s a business project, retirement plan, or political strategy: “If you fail to plan, you are planning to fail!” Architects would never begin construction of a building or home without a detailed plan on what the end result should be, and how they expect to accomplish that goal. This includes not only the end result but also tools and methodologies toward achieving a finished product that satisfies the customer or business client.
Day trading is no different. Traders need to select tools and define a trading plan or strategy that suits their specific financial targets. This plan will help reinforce discipline in making trade decisions and drive buy and sell choices without the emotions that can derail your end goals.
How Do You Build a Trading Plan?
Multiple factors come into play in developing your individual trading plan:
Risk tolerance – this impacts what investments you participate in. Remember that every dollar you invest is at risk when you enter stock markets or other vehicles such as commodities or currencies.
Knowledge – how much time you invest in understanding charts and keeping up to date on current trends will directly impact your results. Do your homework and use readily available information such as company announcements, charting tools, and market trends to your advantage.
Goals – what are your personal preferences for investments, how much flexibility do you want to allow in your own rules, and what buy/sell limitations do you want to set for your trades?
Rules – what indexes, analysis tools and charts, and oscillators will you use in making decisions? Are options and futures included in your trading plan and if so, do you fully understand the differences between those financial vehicles and the impact on your capital? Take time to read or to even take investing courses at local community colleges to gain valuable insight to your own day trading approach.
Set your buy-in and exit strategies to align with your risk tolerance to avoid catastrophic losses that put you out of the trading business. Think of your trading plan as a business plan like any entrepreneur would formulate as their roadmap to success. You’re the builder of this financial house – make sure you know how to put the pieces together.
Your trading plan will evolve and require fine-tuning as you become more comfortable with how trading really works and as your expectations of day-to-day trading results begin to take shape. Remember that a trading plan is your basic premise or mission statement for how you will invest for the long term. A single trading session will adhere to your trading plan and contribute to future improvements that enhance your profitability.
Continuously Revisit Your Trading Plan
Market volatility and changing global economic conditions can generate the need to adjust your trading plan accordingly. As you gain experience in day trading you will also find that your strategy needs continuous refinement to align with your changing financial goals. Becoming more comfortable with some basic trading tools such as various indexes, charting techniques, and reliable news feeds will also allow you to dig more deeply into more complex investment vehicles such as options and futures.
SureTrader is an online broker well positioned to provide you with the information and analysis tools that relate to your trading plan. Clients are presented with sophisticated features and options make your trades more profitable. Quick execution of your trades maximizes the effectiveness of your trading plan.
Friendly and reliable service is at your disposal 24×7 to answer questions and resolve problems quickly and consistently. SureTrader services are available to clients anywhere, anytime with the widest technology options including your desktop, laptop, and mobile devices (Android and iOS devices are supported). Trade on your own personal schedule even in after-hours markets.
Contact SureTrader right away to get started doing trading with the best in online brokers.
Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.