A business plan is essential to help you think about and manage the risk you are about to take. One trading method is the way you respond to settings and signals to actually enter a trade. Trading methods will be discussed in Part II of this series of articles.
A good plan trade tools with a successful method will lead to the success you hope to achieve. Here is an example of a business plan and business method that work together.
The next day, AAPL raised $15.00 on the news that Steve Jobs signed a new multi-year contract! His method requires you to sell half of your position when the stake is greater than or equal to% 5 in one day. Sell 50 shares for $215 and accumulate $750 in profit before commissions.
Conversely, if the AAPL fell to $191.75, his method tells you to cut your losses because the three-day low was broken. Immediately place an order to sell all the shares. AAPL continues to decline as news of Steve Jobs leaves the company. In the next few days, the stock will drop to $ 179.33.
These two artificial examples show that a good plan will prevent you from losing all your capital – you only risked 1%. A good method can make you profitable. When both components are in place and used, you are on your way to success.
A business plan also allows you to track your progress and spot weaknesses in your plan. Seeing a mistake is easier to correct than guessing what went wrong or viewing it as “bad luck.” For example, you may decide that 1% of your capital is too much to risk per trade.
If you control your actions and responses by following your plan, you will be more successful faster than someone without a plan. The rules will eliminate stress, confusion, and shocking reactions. A good business plan will lead to consistent profitability, discipline, and repetition that are hallmarks of successful traders.
The main question is “how much can you afford to lose?” Never exchange money that would change your life if you lost it. Business capital is replaceable capital.
Consider how much of the total capital is at risk in the market at the same time. For example, some traders risk 1% of their total capital per trade. Others risk a total of 20% of trading capital at one time on all open trades.
Money and risk management are the most serious aspects to consider. If you can manage your risk and obey the rules of your trading plan, you will be successful. If you don’t manage your risk and lose your trading capital, your trading career will come to an end.
What type of merchant do you want to become? If you want to trade during the day, you should be almost in front of the monitor during market hours. Maybe you have a full-time job and can only spend part of your time trading. Think about how many hours a day you can spend researching and analyzing data. This will realistically tell you what kind of operations you can manage.