If you fail to plan, you plan to fail. This age-old adage might be somewhat of a cliché expression in today’s society, but it still holds a lot of value in many different industries. The investment sector, especially, is one such industry in which planning is essential. If you want to become a successful trader, you simply cannot afford to enter into a market without first strategizing your exit, entry, and money-management criteria.
Do you want to reach the pinnacle of the investment sector? If so, you simply must build a fool proof trading plan for yourself. To find out how that can be achieved, be sure to read on.
Perform a risk assessment
If you do not perform a risk assessment, you will not be able to incorporate your risk level into your trading plan. Should your plan lack this all-important element, you will be liable to make unnecessary and costly mistakes going forward.
To perform a practical and thorough risk assessment, you must:
Set stop-loss (S/L) and take-profit (T/P) points
- Consider the one-percent rule
- Calculate your expected return
- Diversify and hedge
Set short- and long-term goals
Your trading plan should be comprised of both short- and long-term goals. The short-term goals that you set yourself will allow you to take advantage of realistic profit ratios whenever you enter new and previously untested trades. The long-term goals that you set yourself will keep you on course regarding monopolizing your niche market.
To ensure that your finger remains very much on the pulse of your market, you should revaluate your goals regularly. Set aside time every month to do this, you should look at your trading plan to see if the goals that you previously set yourself are still relevant.
Trade contracts for difference (CFDs)
CFD trading is a form of investment that you should take full advantage of while you are building your trading plan. This burgeoning form of investment will allow you to speculate on financial markets without having to buy or sell any of your underlying assets. By taking advantage of CFD trading, you will be able to put your trading plan to the test in a risk-free environment.
The popularity of contracts for difference trading has grown exponentially in recent times. This is because it provides both novice and established traders alike with an opportunity to:
- Expand their capital
- Take advantage of leverage
- Make profit without paying any stamp duty
- Trade in a vast range of different markets
- Mirror the underlying market
- Hedge their share portfolio
- Use DMA
No matter which pieces of the above advice that you heed and put into practice, just make sure you do one thing — write out your plan. You can’t just make mental notes of your trading strategy; you need to set out your guidelines in a physical capacity. If you do that, you will be far more likely to remain on course regarding achieving your overall aspirations in the trading sector.