According to the top financial analyst at Wilkins Finance, Donovan Helmuth, many online traders think that trading by the wits of their own pants is the best way to make a profit. However, it has been proven that in order to minimise your risk of failure, you need to make use of a trading plan. A trading plan will not only give you a solid structure of what you need to do in order to execute a perfect trade, it will also give you a great perspective of what you can change to make your future trades more profitable. With that said, what are the most important things you need to do before you start using your trading plan or strategy?
Set entry and exit strategies and stick to it
The entry and exit points of a trade are the most curtail parts of the entire process. The point at which you enter into a trade should be set on solid strategy and not on your emotions. The same goes for your exit strategy. If you don’t have a solid exit strategy set aside for your trades, you might make emotional decisions as you are under stress as a result of the trade and the capital invested in it. The stock market, especially that of cryptocurrencies, are highly volatile and a split-second hesitation could mean losing on the trade. Therefore, having an exit strategy and sticking to it will eliminate the factor of hesitation.
Focus on the decisions you make and do not overthink
It is a known fact that split-second decision making is vital in some trades. You need to think fast, act fast and be confident with the decision you have made. Remember to have a plan where decisions are concerned. If you work according to the plan you have set out for trading, there is less room for overthinking and making fatal errors when wanting to make a profitable trade. Overthinking can lead to emotional strain and when your emotions come in the way, it clouds your judgement to make informed decisions.
Evaluate your past trades
If you want to find out if your trading strategy is working or not, it will help you to keep a diary. This can be in the form of an online trading log or a book in which you write down the details of a specific trade. Keeping a log of the trades you make will give you a good overview of what you are doing and if you are doing it the right way. However, if you really want this to work, you need to be honest with yourself and be aware of how you execute a trade. If you are able to evaluate your past trades, it can impact your future ones in a positive way. It can also show you where you can improve and what other strategy options you can consider.
Trading discipline to simplify your trades
A great way of explaining this point is by using the example of an entrepreneur. An entrepreneur needs to have a lot of discipline when it comes to running a successful business. Without discipline, an entrepreneur will never see success and profit. In the trading world, a trader can also be seen as an entrepreneur of sorts. A trader needs to have discipline, not only when making trades but by also when sticking to a trading strategy. If you have discipline when trading, it enables you to simplify your trades. With simplified trades, you have an uncomplicated way of making a profit that is easy to understand, execute and keep for future reference.
When you have all the above-mentioned points under your belt, you can start using your trading strategy with confidence. If you think that it is only first-time traders that need to have a trading plan and follow the above pointers, you are wrong! Seasoned professional traders constantly improve their strategies, try new ones and evaluate the trades they have done in the past to make their future trades even more profitable.