“Treat trading like a business and you will succeed” – this is the common advice of successful traders. If you don’t treat trading like a business, you are most likely gambling because you are only relying on luck and do not have a concrete plan on how to obtain your goals. Therefore, a trading plan is a crucial part of trading.
Why Is A Trading Plan Important in Trading
When you have a trading plan, you have a roadmap to follow on your way to success. You get to choose your broker, trading platforms like MetaTrader 5, and the tools you will use in trading. This roadmap to success is something that needs to be created and isn’t optional at all.
It doesn’t need to be complicated. In fact, an easy-to-understand trading plan would be more effective. What you need is a detailed trading plan, with all the information that you need to trade profitably. You can add illustrations to your trading plan but others prefer technical manuals and stuff. The trading plan must include money management, risk management, trading disciple, and your entire purpose of trading.
Evaluating Your Performance
How many trades should you partake in to be able to evaluate your performance? Why should you evaluate your performance in the first place? Evaluating your performance will help you know the type of trader that you should become. You can base your trading performance on the number of trades that you place every day.
Identifying The Best Time of the Day To Trade
For most day traders, it is highly recommended to put a limit on your trading activity. You are advised to trade from 9:50 am until 12 pm only. Any trades before and after these hours are just spectators.
Know The Stocks To Trade
A standard methodology must be developed to easily identify plays. Ask yourself – what is the time horizon best for this specific trade? Mostly, day traders focus on stocks that are in the news but long-term traders will eye on stocks with developing business models that showcase potential growth in the coming years. No matter your trading style, you have to ensure that you have the highest profitability.
Ensure the Use of Stop Loss
There are a lot of traders who do not use stop loss because they think that it is a negative thing. Contrary to this belief, stop loss is actually the tool that can keep your business going over a long period of time. Stop loss is triggered whenever the parameters that you have set are hit. It will automatically stop the trade in MetaTrader 5 so as not to incur more losses. This is especially helpful during volatile markets.
When is the Best Time To Exit?
As the saying goes – “Let your winners run”. In some cases, this is not entirely true. Greed will prevent you from closing profitable trade even if it doesn’t follow your trading plan anymore. You will only realize that you did a wrong move when you hit rock bottom. As much as possible, create a clear exit strategy and follow it diligently.