In this article, our team at Trading Strategy Guides will show you how to design the best trading plan strategy. We’re going to take walk you through an easy trading plan template that will elevate your trading to the next level.
At the end of this guide, you will have the knowledge to build your own trading plan.
If you’re just learning how to trade, this is a great place to build your trading foundation. We recommend, once you have a trading plan, to start with our Chart Pattern Trading Strategy Step-by-Step Guide. It’s free and there are additional trading strategies to come.
So where do you start?
First, consider the preferred time frame you want to trade. This comes down to work commitment and personal preference.
Third, you’ll need something to look for as a signal to enter. You can use price action, support and resistance, indicators, or a combination of these.
Forth, you should consider a risk management strategy and your position size per trade. We recommend a maximum risk of 2% of overall account value per trade. When you’re first starting and learning a new trading system, trade much lower than this?
Lastly, you need to backtest your trading plan template.
Basically, these are the four pillars of the best trading plan strategy. However, a good trading plan template can be composed of a lot more components that are just subcategories of the four pillars.
Now, let’s take a look at the best trading plan strategy that can be the template of a successful trading plan. Depending on your circumstances, your plan may be similar or complex. We also have training on how to profit from trading.
Best Trading Plan Strategy
The main reason you need to design your own trading plan template is to be able to replicate our good trades.
Basically, this should be your trading Bible! Unfortunately, 90% of all traders trade without a plan.
Your trading plan should incorporate all the necessary trading rules so you can become a successful trader. If you want to create a consistently successful trading plan for the market, follow this step by step guide.
We’re going to go through some of the key aspects that you can use as a guide to build your own trading plan, if you haven’t developed one already.
Now, these are some of the essential components of a professional trading plan:
Overview and Goals of Your Trading
This part is very crucial because you need to have a vision or plan for what you want to accomplish through trading.
It’s good to trade for money because this is what attracts people to trading in the first place. But you need to have a much greater motivation. This is what’s going to keep you moving forward whenever you have a bad time in trading.
You need a basic reason why you should stick to trading and why you need to keep going and trust the process over time.
Your trading goals are going to be personal because each trader has different goals and ambitions. Our team at TSG believes financial freedom, travel, and family are strong motivational values any trader has.
Trading Plan Template - Preferred Time Frame
The time frame used depends on your personality. If you want instant gratification, you’re better off trading the intraday chart, such as the 5-minutes time frame up to the 15-minutes time frame.
However, if you’re a slower thinker, and like to take your time before you make your trading decision, you're better off trading the 4h time frame and the daily time frame.
You can also have the option to use multiple time frame strategy depending on your level of experience.
Best Trading Plan Strategy - Preferred Trading Session
The next thing you need to decide on is what your preferred trading session is? If you’re simply day trading, you might want to pick one trading session that suits your time zone best.
You’re better off if you focus on the two major trading sessions the London session (8:00 – 16:00 PM GMT) and the New York session (13:00 – 21:00 GMT). These are the two of the most liquid trading session especially when they overlap.
However, if you’re located in Asia and your time only permits you to trade the Asia trading hours, you should focus and make the best out of the Asia session.
Preferred Instruments to Trade
What currency pairs are you going to trade?
If you trade stocks you might have some preferred stock to trade?
Since not every trading day is the same we recommend you to focus on those instruments that offer the best trading opportunities for the day. It’s not indicated to force the trade on your favorite instrument if the market doesn’t present itself with an opportunity to make money.
You can also follow more than just one currency pair but it all comes down to your trading style.
The trade execution process comes down to what is your trading setup.
How do you base your decision to enter the market?
How do you base your decision to exit the market?
How do you base your decision to protect your trade if the market goes against you?
These are the basic three parts of any stock trading strategy that you need to answer before executing a trade. You can enter a trade based on a price action pattern. Although, sometimes the reason behind a trade is due to fundamental factors.
There are many technical tools that can be used to trigger a trader. This includes support and resistance, indicators, price patterns and a combination of these.
Money management is absolutely essential for your long-term success in this business. If math is not your thing you can incorporate trading plan software that can help you with the risk parameters.
Risk management is critical because if you don’t understand your risk, chances are that you’re going to be like the other 95% of traders that are estimated to lose money.
You’ll need to figure out your position sizing which is related to your stop loss and percentage risk per trade.
How much capital you’re going to risk per trade is another variable of your money management strategy that needs to be addressed. This also equates to the same capital that you’re going to lose if you’re headed into a drawdown or negative phase of trading.
You also need to decide to only take trades with a positive risk to reward ratio because this is what will ensure you come ahead even after a series of losses.
Keeping Track of your Trades – Trading Journal
Keep up a detailed record of your trading activities!
Obviously, you will need to journal more than just your profitable trades and the losing trades. You have to record all the reasons that lead you to take the trade so you make sure you’re following your trading process.
But, you also have to keep track of your frame of mind and mindset.
What did you do well this past week?
What were your strengths and weakness?
Where were your mistakes made?
Answering these questions and keeping a detailed record will give you an opportunity for you to go back and review your trades and keep a detailed history of your trading activities.
When you write these things down it will help you remember the important stuff that leads you to make successful trades. And when you can identify the variables that helped you to make profitable trades you can repeat the same trading process over and over until you gain financial freedom.
The best plan trading strategy is not a big plan with thousands of pages that you have to go through. What you need to understand is that the best trading plan strategy needs to be effective, it has to be short and simple and you had to have it on your desk.
Everyone has its unique trading style and risk tolerance it’s recommended to develop your own personalized trading plan that follows the trading plan template highlighted in this trading guide. There is an old trading axiom that says “if you fail to plan, you’re planning to fail” and if you’re serious about trading and if you want long-term success you need a trading plan. You can also read our best short-term trading strategy.
You can design your own trading plan by using special trading plan software or you can simply use our own trading plan template which is the best.
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