Module 8: Lesson 1

MODULE EIGHT: TRADING PLAN

1. How do you make a trading strategy?

A trading strategy is an all-encompassing tool for making trading decisions. It assists you in determining what to trade, when to trade, and how much to trade. A trading plan should be unique to you; you can use someone else’s plan as a guide, but keep in mind that their risk tolerance and available capital may differ significantly from yours.

Your trading strategy can include anything you want, but it should always include the following:

• What drives you to trade?
• The amount of time you want to devote
• Your trading objectives
• Your risk-taking attitude
• The amount of money you have available to trade
• Guidelines for personal risk management
• The markets you would like to trade
• Your trading strategies

Record-keeping procedures

A trading plan differs from a trading strategy, which specifies how to enter and exit trades precisely. ‘Buy bitcoin when it reaches $5000 and sell when it reaches $6000′ is an example of a simple trading strategy.

Why do you require a trading strategy?

A trading plan is necessary because it can assist you in making rational trading decisions and defining the parameters of your ideal trade. A good trading strategy will aid you in avoiding rash decisions made in the heat of the moment. A trading plan has the following advantages:

• Tranquil trading: all of the planning is done ahead of time, allowing you to trade according to your pre-determined parameters.
• Decisions that are more objective: Because you already know when to take profits and when to cut losses, you can remove emotions from your decision-making process.
• More space for improvement: defining your record-keeping procedure allows you to learn from past trading mistakes and improve your judgment.
• Better trading discipline: by sticking to your plan with discipline, you may be able to figure out why some trades work and others don’t.