Creating a Stock Trading Plan
Today's article is based on the idea of creating a stock trading plan (sometimes referred to as a stock trading strategy, trading rules or trading system).
Even though this can be and is often considered a "basic" concept by many and sometimes a "no-brainer", it really is the primary building block to become successful at stock trading.
Taking a different approach and thinking abotu this from another angle, consider that you are in high school and would like to become a doctor, accountant, attorney, software engineer or any specific career for that matter, your best chance of reaching that goal is to develop a plan or strategy which involves specific courses, schools and potential companies that may hire you in your chosen field.
In contrast, someone who wants to work in a specific career field as mentioned above and drops out of high school because they have no desire to continue schooling and goes to work part time at Taco Bell, would most likely not reach their specific career goal.
Granted, there is always the possibility that the latter will succeed also, but there would be a greater chance of meeting the end objective to those who develop and follow their plan or strategy.
Having a goal of becoming successful at stock trading is very similar in this respect - developing a stock trading plan will increase the odds of meeting the end objective.
Of course, all plans and strategies will not work as expected all the time and you should be willing to spend time making adjustments and some sort of trial and error period to see what works for you individually. As an example, if you want to spend time scalping the markets and limit your trading time to the first hour of trading each day but you live in California, you will either have to wake up very early, move to the east coast or come up with a different stock trading plan that fits your lifestyle better.
Some basic ideas on creating a stock trading plan to get started would be: 1) what markets or stocks to trade, 2) what the current overall market trend is, 3) when to buy (what will signal or trigger a buy), 4) when to sell once a position is opened (stop losses), 5) position sizing, 6) recordkeeping requirements. These are just a few ideas to get started with and you can develop a plan as simple or complex as fits your individual needs.
Once you have a specific stock trading strategy created, be sure to stay focused, disciplined in following the plan and keep good records so that you will be able to review your progress and make adjustments for improvement. Remember to set realistic goals as well. You don't have to be right 100% of the time in order to be profitable overall if you develop the plan correctly. Many successful traders are only correct on 50-60% of trades and are still profitable.