It is very important to have a game plan before trading. This way you know what to do in different circumstances. You should not be left trying to guess what you want to do with your stock positions but you should have a define plan and stick with it.
It is very important to have a game plan before trading. This way you know what to do in different circumstances. You should not be left trying to guess what you want to do with your stock positions but you should have a define plan and stick with it.
Your game plan should be determined before you enter a stock trade. It is easier to make rational decisions before you enter a trade then after you enter it. So, what should you include in your game plan?
1. When are you going to enter the trade? You need to decide whether you going to enter based off of some technical indicator like a breakout or a bounce off of support? Do you look at any fundamentals? Deciding when to enter is a very important piece of the puzzle. You should have some consistency with this. Developing an entry that is consistent can help you in the long run.
2. How are you going to manage the position once you are in it? This is just as important as knowing when you are going to enter a position. You might decide you want to follow the position up with stops. If so how tight are you going to keep the stops? Do you manually adjust it or do you set a trailing stop.
Maybe you don’t want to follow the stock up with a stop. But however you plan on managing it is important to figure that out before hand.
3. How do you plan on exiting the trade? This is probably the most important part of your game plan. You can do everything else right but if you mess this up it will not matter. Remember you do not make a profit until you sell. Deciding whether to use a target or some other approach is very important.
Having a Game Plan is the first step for successful trading. It will not guarantee a profit but it is a good way to start.
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