Why Planning a Trade and Trading the Plan is essential to succeed at Online Trading

It is a fact that more than 90% of all retail accounts opened with $10,000 or less are closed out in less than a year because the traders who opened them have lost almost all their money in that account. That proves that newer traders are not hearing that or think it will not happen to them. It applies to all traders and not controlling losses destroys trading accounts quickly. There are many courses out there on futures trading, forex trading, currency trading and so on that promise to make us rich very quickly. That is just not the case. Some people are not built emotionally right for trading or are simply not ready to trade. We need help to become successful at trading. Many people think they can read a book or two on trading and learn to trade against the rest of the world’s traders. A trader’s account size and emotional structure determines the final outcome. It takes a few months and maybe even years to truly master the art of trading. Traders need a solid foundation and discover their own trading talents as they go along. Once a trader has found a particular way to trade he needs to master the tools of his trade. The smaller the account, the lesser the room exists for errors. And in trading a newer trader definitely needs to leave a lot of room for errors without being pressured while doing it.

Good day traders always limit their losses and reward themselves when they have a great day. If a trader risks $100 to $150 per contract per trade then he should have a reward that is at least twice that amount. This way the trader has a risk to reward ratio of 1:2 and can be right only 50% of the time and still make money trading. It is always nice to know the risk before a trader takes a trade. This way you know what you are paying the market to get what you want. This way if a trader loses he or she will have less stress as they are mentally prepared to pay that price to the market to get twice the amount back, if right.

A trader must also plan on the amount of money that they can lose in a day. If a trader loses then he might want some limits to stop at some point as it means he might need a mental or physical break at that point. Good traders never violate the rules they have written in their trading plan and if they find themselves doing so then it might be time for them to take a break. On the other side of the coin good traders also plan on their winning trades. Say if they are up a certain amount then they stop trading for the day. If a trader makes his weekly or monthly goal before the end of the week or month it is a good idea to take off the rest of the week or month. After all trading is hard work. So if a trader has a nice big profit in his account it is always a smart idea to take it and run away as there are many traders that get greedy and think they can get more and wind up with a much smaller profit or maybe even a loss.

It could take a trader several days or weeks to plan his trades around a business plan but it surely will pay itself off very well over time. Good traders always keep their plan around where they can see it easily while trading. ALWAYS PLAN YOUR TRADE AND TRADE YOUR PLAN. It is always a good idea to walk away from trading if a trader breaks any of their rules. This will increase a trader’s confidence in trading. A trader might feel horrible to walk away from it initially after they broke their own rules but it will save them a lot of money and emotional damage going forward. To become a successful trader one must learn in depth the market market they choose to trade and even more important is to learn more about their own emotional self first. That it why it is so important to remember that losses are part of the trading business and something to learn from. It will be very difficult to become a consistently profitable trader until one can master their emotions and not let them come in the way of their trading. Once that emotion is overcome, success will naturally follow.