Your Trading Plan
How to Invest your Money
with a Good Trading Plan
Do you want to know one of the best kept secrets on how to invest your money? Sure everybody wants to know that, well here it is: create a trading plan.
That’s it! This simple step can be the difference between becoming a successful or unsuccessful trader.
Sound simple? In theory it is, but most people will never do this simple step. If a trading plan is so important why don’t more people do it? I believe the main reason is they don’t actually believe it will help their trading.
So what is a trading plan? In the simplest form, it is a set of rules you follow to determine how to invest your money. These rules can be very detailed or broad. For example, a broad rule may be; buy when the 10 day moving average is above the 30 day moving average. A more detailed rule may need to add additional information. For example, if the 10 day moving average is above 30 day moving average on the close and the security has made two higher highs on a 30 minute chart the next day, then I will buy. It’s not the actual rules in your plan that makes a difference; it’s that you have a plan that makes a difference.
So why is a trading plan so important? EMOTIONS!!!! Emotions are the reason a trading plan is so important. Emotional trading will cause you to lose money! One of the ways to gauge whether you are letting your emotions control your trading is to pay attention to your heart rate when you place a trade. If you have a plan on how to invest your money you shouldn’t notice any change prior to the trade or after the trade. On the other hand, if you notice your heart rate elevating prior to or after a trade then you are letting your emotions control your trading and that is a sure fire way to lose money.
The only time to trade is when you have a plan on how to invest. Some of you will hear this loud and clear. For others, it may still be too soon for you to realize just how important this one secret is for your trading. Eventually, if you make it through the early years of trading you will come to realize just how important this secret is to your trading. Everything we discuss on this website is designed to help you learn how to invest your money and create an edge in trading.