Trading is the riskiest profession in the world where losing money is a natural thing. But the main difference that makes a trader profitable or a loser is the trading plan. In the trading industry, you must need to be alive to make earning from this industry, and in this case staying alive means having a trading balance.

Because to make earnings from this market you just need to take risk of your trading balance. So a full-proof trading plan helps a trader to stay in profit without losing his whole trading balance. Traders will face some losses while trading but a proper trading plan can help traders to make a decent profit so that those losses cannot harm the trading balance much. In the following article, we are going to talk about the importance of having a trading plan and how to create one.

Importance of having a trading plan

If a trader can understand the market well then how much he can earn from it, he cannot even imagine that. As a result, the main challenge of trading is to control traders’ own emotions and because the trading plan is so important. A trading plan helps traders to control his emotion and greed from talking any reckless decisions. Trading with a proper trading plan helps a trader to trade with more confidence and even he can push himself out of his comfort zone. A trading plan keeps you away from taking wrong decisions and staying on the right track.

During the strategy development phase, make sure you learn the basics about the ETF trading industry. Visit https://www.home.saxo/en-sg/products/etf to get the basic knowledge as it will help you to curate a better plan.

How to make a trading plan?

A trading plan is the reflection of a trader’s psychology, goal, and trading personality. You will never find two traders following the same trading rule because different people have different kinds of preferences and personalities. Now we are going to talk about few steps for creating a profitable trading plan and strategy.

Assess your skill

Many novice traders start developing their trading plan without having any knowledge and thus they lose money. Before you start working on your trading strategy, you have to assess your skills. Unless you know about the support and resistance and other basic concepts, you are not ready to develop your strategy. To learn the basics, you may open a demo account and trade the market while learning the important factors related to trading. Once you have the basic skills, you can start working on your strategy.

Risk to reward ratio

Most novice traders don’t pay any attention to the risk to reward ratio. They take unnecessary risks and loses money most of the time. But if you intend to make a consistent profit from this market, you must maintain a high risk to reward ratio. Make sure your trading system can find trade setups 1:3 risk to reward ratio. Stop trying to trade the market with a negative risk to reward ratio as it will make the overall trading process very hard.

Phases of the trend

We all know trend trading is the most effective way to make money in the retail trading industry. But very few traders pay attention to the trend trading strategy. But to develop a robust trading method, you need to learn about the different phases of the market trend. Once you learn about the core functions of the trend, you should feel much more confident about your actions. Study the use of the Fibonacci retracement tools so that you can find the endpoint of the retracement.

Riding the trend is not all tough once you know the right technique. It might take a while to develop a well-balanced trading method but you should never lose hope. And make sure you test the performance of your strategy before moving to the real account.

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