Having A Stock Trading Plan Is Essential

Dec 05, 10 Having A Stock Trading Plan Is Essential
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If you talk to successful stock traders, you’ll that most of them have one thing in common. Many of them have good, workable trading plans. When you’re planning to go into the stock market, you could do worse by emulating these success stories and formulating a plan. Let’s be clear though, a trading plan provides more than just rules for trading and when to buy and sell stock. A good plan outlines strategies and goals, while providing a blueprint for success.

Every trading plan starts with a goal. Some trading plans have nebulous goals such as, “I want to be rich before retirement,” but you quickly find out that plans with such ambiguous goals usually fail. Realistic, measurable goals are what you find in good plans. What do I mean by realistic and measurable? First, the goal must be reachable and provide a definite gauge for a person’s level of success. Experienced traders usually define these goals by setting a profit/loss margin for a particular span of time. You’ll know if you have met your goals if you have a definite profit target at the end of the week. Even if you don’t reach it, you can measure how successful you are and make adjustments as needed.

Another part of a trading plan is having a definite market or field to target. A good trader chooses a field that they’re interested in or are informed about. The stock market is a fluid thing and the only way to make sure you don’t get any nasty surprises is to always have the latest information available. Information is money in the field of stock trading.

Finally, entry and exit strategies are formulated to reflect a trader’s personality. A daring trader can wish to make his margins higher, while a more conservative trader would lower his negative sell price a bit higher in order to avoid a larger loss. Going against personal instinct is a hard thing, that’s why traders tailor-make their strategies to match their temperament. In a highly volatile market, gut instinct and a solid trading plan may be the difference between huge profits or disappointing losses.

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