There are generally five essential elements of trading plan which helps traders to make profits. So while making a proper trading plan you need to keep in mind these five important points which are given below:
1. Trading Time- Trading time is one of the important things while making trading plans. Even though if you want to trade 24 hours a day and 7 days a week you cannot do this though the market is 24/7 open. Therefore all you need is to make pips to the maximum in a comfortable way. For a trader working 9-5 in US may even trade 8PM-10PM in Asian session. A UK professional trader may work for few hours when the session overlaps between New York and London.
2. Risk Allocation – taking risk in trading is a common and not a very difficult thing for long –term traders. So highlighting willingness to take risk while making a trading plan is not a new thing. And for a long –term trader taking risk only for 5% is not a big deal and therefore they would earn 500 pips while losing 250.
3. Specific Goals –making a specific goal in trading is very important. Sticking with the trading plans and goal will help you in controlling your emotions while trading. In trading making money is not the exact goal but earning 20 pips a day is your trading goal.
4. Trade Criteria – while making trading plans you also need to include the trading criteria so that you can stick to your trading plan. Most of the successful traders always keep in their mind their trading plans and strategies. So you need to make aware of some questions that are common in trading such as will you trade only the new releases and make money? Is your trade going to be a long-term trade or a trade that focus on making money in a short-term? Will you avoid fundamentals of trade and focus on technical analysis?
5. Scoping the Market – most of the new traders fails to stick with their trading plans. This is mainly due to the information they receive and therefore they cannot make their own decision in sticking with the trade plans. Therefore all you need is to make a well developed trading plan and should know all the current condition of the foreign exchange market. So you need to depend on some media that will help you in updating your trade plans.
So considering the above discussed elements now you can work and make profits keeping in mind the trading plans and strategies. And for this having some ideas about a trading journal will help you in accounting your trading plans and the way it works.