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A trading plan and rules needs to cover every scenario you are likely to encounter when trading.The way you need to think about your trade plan is; if a family member that does not know about your trading had to step in and manage a trade for you had open, and all they had to go off was you trading plan, could they do it? A rule set that clearly sets out your edge in the market and exactly what that edge looks like to you. The reason a trading plan is so important is because the plan is what a trader uses to make their trades, manage their trades and take profit out of the markets systematically.
These can be to remind you and help you stick to your rules.
An example of one of these checklists may be for the pin bar.
I believe that is why I love to use the word business plan when speaking of “watch list” instruments/setups. Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach.
It reminds me…at all times…that this is a business where the better capitalized and more experienced traders want to put your money into their accounts. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading.
Once the variables in the plan fall in line, you execute without hesitation.
To do anything other than that lacks consistency and without consistency, long term success will not be yours. This brings me back to a piece I did called “Developing EURUSD Forex Swing Trade”.
Following your plan does not simply mean just on the current trade you are involved in.
Often times, especially in swing trading, you can have plans set up for a few instruments at one time.
What occurs after a potential failure is what will determine the next course of action for this trade.
The business plan allowed me to have potential trades lined up which would allow me to have a chance to enter a potentially profitable trade. The trade plan forces me to stay present and to aid in my ability to keep emotions out of the decision making process.