In trading forex, a trading plan is a systematic approach that regulates all aspects. Basically, the trading plan consists of 3 systems that work simultaneously. Besides, those 3 systems are the main pillars of trading plan.
What are the 3 main pillars of trading plan?
They are a trading system, money management, and emotion management system.
The trading system determines the right time for entry and exit. The analysis based on the trading methods and strategies that you use. The money management system determines the amount of risk per trade and position size according to the balance in our trading account.
Last, the emotion management system is the ability to regulate psychological conditions. Are your emotions stable and appropriate to open trading positions? If your emotions are volatile, it will have an impact when you make decisions in trading.
Trading System
To make a good trading system, you can begin to record in detail the level of entry and exit that has been done. You can evaluate the trading history. You should do short-term evaluation immediately after you complete the trading process.
besides, you can directly considered the trading log can as a trading journal or benchmark to create a trading journal for long-term evaluation. You can use trading logs as a measure of the extent to which our entire trading system works in a certain market condition.
Checklists for entry and exit levels should only be at one price level and not followed by a second option (ambiguous). You should emphasize that you can only do entry or exit if you consider trading signals valid. If there are 2 choices that are equally valid, it should be taken that the probability is greater.
Money Management
For money management, the percentage of risk that you specify should be quite realistic and in accordance with the conditions of the balance at that time. Besides, you can also add a note of the risk/reward ratio for each trade to the system checklist.
Emotion Management
You need a checklist of the emotion management system to record your emotional history during trading. This can be meaningful if you read the trading log after a number of trades.
By always evaluating psychological conditions when trading, you will achieve emotional stability in the long run. According to Investopedia, the psychological aspect of trading is extremely important because the traders often have to think fast and make quick decisions.
Read more: Price Action, The Best Systematic Trading Strategies
