Trading is a business and every business has a detailed plan for success. A trade plan provides the same level of discipline and detailed attention to your trading business as you would give to any business you manage. By documenting a trade plan, you will know what works and how to avoid costly mistakes in your trades. Ask any successful trader who makes money on a consistent basis; he will answer that he has a trade plan and trades according to the plan.
Fail to plan and you plan to fail. A trade plan focuses on:
Personal & Financial Goals
Define your goals and reasons for trading. In business you achieve success if you have a set of clearly defined goals. Have a clear picture of what your overall personal and financial goals are and link these to your trading plan.
A key element to success in trading is 'discipline'. Self discipline is important in trading business to control your actions.
Capital allocation, reward to risk ratio, set up cost of your trading business, trading journal, your initial roadmap, scaling your trading business are factors that impact your success at trading.
Keeping a trading journal is an effective way to record your trade patterns and other factors relevant to your trading. Review your trades for each trading session.
Determine the amount you are prepared to risk on each trade as a percentage of your trading account capital.