6 Winning Techniques to Establish a Successful Trading Plan
Successful trading plan is the key to earn healthy profit and remain successful in trading. There are 6 Winning Techniques you can follow to be successful while trading.
1. Assessment of Trading skills
Do you have the trading skills required to perform trades in stock market? Have you ever tested them? Trading is a game of profit and loss. One who trades in the stock markets builds his skills gradually. Some skills are learned while others are created by going through the process of trading. By assessing your skills you can build confidence which helps in staying focused and to earn a healthy profit.
2. Prepare Your Mind
Do you feel motivated and excited when it comes about trading in your mind? Do you have passion for trading? Its very essential to be mentally prepared before entering into trades. If you are not mentally and emotionally ready for the trades then its good to take a break for a while to prepare the mind and get ready for the trading. Sometimes we are distracted by some other task at hand and are not in a position to plan and execute the trades. In that scenario it is better to finish the first task at hand and then clear and prepare the mind for trading. Focus and concentration of mind can bring rewarding results for you.
3. Assess Your Risk Tolerance
How do you feel about thinking about the loss? Does this put pressure on your nerves? Are you risk taker or risk averse? Stock market is a riskier place where you can earn profit as well as sometimes have to bear loss. Assess your risk tolerance and set some percentage like around from 1% to 5% for loss on your portfolio. This mainly applies to day traders and short term investors. In the long run prices tend to normalize which usually cover loss. By analyzing your risk tolerance and applying a specific risk level you can minimize your loss, will stay on the track and will keep moving towards success.
4. Set Your Profit Targets
How much do you want to earn? What are your earnings goal? This is very essential to set your target profit before entering into any trade. This can be in amount or in percentage of your investment. Set realistic profit goals on weekly, monthly and annual basis and review them regularly. This will keep you at ease and you can set limit for the trade and can do anything else and the trade will execute as the limit reach and you will gain your target profit.
5. Make Proper Entry Plan
A true profit depends on our buying. It has great importance to buy a particular stock at the price where there is potential for rise. It encapsulates many factors to estimate the price at which a particular stock has to be bought. Many decisions are based on probabilities. The success of investment mainly depends on identifying undervalued stocks, the stocks that have potential to grow. Make your proper entry plan and enter into the trade as your specified conditions meet.
6. Make Proper Exit Plan
Most of the traders pay more attention towards entering a trade and very little attention towards when and where to exit. Your each trade should have a profit target according to your set targets and stop loss condition have to be placed according to your risk tolerance level. Make a proper exit plan while entering into any trade. Never take risk more than a set percentage of your investment on any trade. There should be at least two things for each trade. The first thing is to set your stop loss if the trade goes against you. The second thing is to set target profit for each trade. By applying this method you can take healthy profit and safeguard yourself from losses.