One of the leading causes for the failure of many businesses is their lack of planning.
If you want to be successful in life and business, you need to have a plan for how to obtain that success.
Trading is no different from any other business.
It is important to have a written business plan for your trading just as you would for any other business.
Like we mentioned in the previous lesson…
“If you fail to plan, then you’ve already planned to fail.”
In other words, those who fail to plan out their trading like a business are doomed to fail.
Here are twenty-one crucial questions that you should have an answer to as part of your trading plan.
- What are your specific reasons for wanting to become a trader?
- What do you hope to gain from trading?
- What are your biggest strengths?
- What are your biggest weaknesses?
- How do you plan to address your weaknesses and leverage your strengths?
- What are the things that are going to separate you from the large majority of traders who fail? (Answering with “hard work” isn’t enough. Lots of hard-working traders still fail.)
- Will the things you mentioned above actually give you an edge in the markets so your trading outcomes generate a positive expectancy?
- What market or markets do you plan to trade and why?
- How much time can you devote to actively following the FX market? And the overall financial market?
- What is your trading style? Do you plan to scalp, day trade, swing trade, or position trade?
- Does the trading style(s) you’ve chosen reflect the reality of the amount of time that you can devote to trading?
- At what times throughout the day (or week) are you going to spend actually trading, researching trades, and then learning about the market?
- What trading system(s) will you be using (your criteria for entering and exiting trades)?
- What is your risk management strategy?
- How will you know if your trading system or strategy stops working?
- After you’ve identified that your trading system or strategy has stopped working, what will you do to address it?
- What trading software and equipment you will use to trade and how much is it?
- Who will you use to access the markets? What broker(s) will you use?
- How much money do you plan to start to trade with? Is this money you can afford to lose without negatively affecting your current standard of living?
- Do you plan to add money to your account and if so where is that money going to come from?
- If you are profitable, do you plan to reinvest profits or withdraw some or all of them?
If you’re really serious about trading, take time to ponder the questions above.
Growth and success need direction and a sense of purpose. Which must first be identified and clearly stated. They won’t appear on their own.
A clear roadmap forces accountability and responsibility, which sometimes may lead to a change in the plan (like when your trading system or strategy stops working). Which is fine, but you won’t know that change is even needed unless you’ve established in clear terms, what is considered “working” and “not working”.
Risks can be turned into opportunities, but first, you need to have identified what the risks are. If not, when they arrive as a crisis, you’ll be on your back foot, most likely panic, and make poor (and unprofitable) decisions.
As you can see, there are many things to consider before hitting that buy or sell button in your trading platform.
Answering each question will not guarantee trading success, but NOT answering such questions will almost certainly guarantee failure.
The choice is yours.
Results are usually proportional to the quality of the planning.
Don’t set yourself set up for failure. Set yourself up for success.