Trading in the capital market is a profession, and as in any profession in order to succeed, you have to be a professional!
From many conversations with traders I learned that most, if not all, start trading without any direction or trading plan. Trading without an organized and defined plan for any situation is unprofessional.
And when there is no plan and goal, the chance to succeed is very small.
So how to build a winning trading plan?
The first step should define a profit and income target.
Usually, most of us calculate our revenue on a monthly basis
and therefore we have to determine the target profit per month.
For example: $2,000 a month.
The profit target will be divided into the number of trading days per month, say 20 trading days on average month. The result is the daily goal, based on the example $100 per day.
According to our daily goal of earning money, $100 a day,
we will examine which contract we are considering trading,
should do, move to achieve the profit target.
Two-points on ES, five-points on NQ, and so on.
We will consider how many pips the market needs to do to achieve the profit target and decide that according to our familiarity with contract behavior in how many trades you sould to make to achieve the daily profit.
Determine the leverage to each position, one contract to take two points or two contracts and take one point, when the profit target is $100 per day.
After determining how and what we should do to earn our daily goal, determine what method, trade technique that you will operate, LEVEL2, charts, oscillators and any other analysis tool, you will write the following rules:
What are the conditions for entering LONG?
What are the conditions for entering SHORT?
What hours during the day will we trade, and when will we not trade or be exposed to the market?
Determine the Stop Loss target for each contract and for each position.
After determining the target of exit in the profit and the manner of loss, in whole contracts or in parts, we determine the actions to be taken and the response when the market is operating without momentum and does not reach the profit target we set on the other hand.
After all this, the plan must be operated without any deviations, like a machine, a robot that responds to what the market does and does not, out of feelings and mental influence.
Experience shows that even after setting a trading plan and rules for entry and exit, most traders do not stick to the plan they themselves set. You can say that all traders are affected and react mentally when it comes to real money. They can get into a spin and break all the rules when exposure to a position that not going as expected.
Cutting the Stop Loss order, moving it negatively, adding contracts to a losing position without any advance planning, and impulsive entry into a position, are actions of disobedience to the rules that lead immediately to high losses.
The only way to make profits in the capital market is to adhere to a trading plan that is backed up by statistical calculations that create a positive expectancy over time in any market behavior situation. A deviation from the plan or a “jump” from one method to another to find the Holy Grail all the time, will lead you to be part of the 95% of traders that will not survive.
The secret you seek is that we are only human beings and the mental influence is paramount to success in trading. Therefore, in order to neutralize this effect, you must act as a robot and act as automatic machine according to a predetermined plan and all over the time.
Geva Gazit – CEO –
Geva International Trading