A good trading plan goes far beyond just defining a trading method. It involves aspects like risk management, operating hours, which markets to trade, the number of trades per day, and even what to do after a losing streak. In this article, we’ll objectively explore everything you need to build your trading plan.
What Is a Trading Plan?
A trading plan is a set of guidelines a trader must follow to operate as efficiently as possible. It’s not just the method itself: it includes risk management, operating hours, markets to trade, strategies, loss limits, profit targets, and even how to behave after a bad trading day.
Live Off the Market or Just Earn Extra Income?
The first question you need to ask yourself is:
- Do I want to live off the market?
- Do I just want some extra income?
If you plan to live off the market, you’ll likely dedicate more time to trading than someone who just wants supplementary income. This directly affects your trading plan, as the available time and your level of commitment will be greater.
Which Markets to Trade and When?
Decide which markets you will trade (B3, Forex, Crypto, etc.) and at what times. For example, if you are a day trader on the Brazilian stock exchange (B3), you’ll have weekdays during regular hours. Forex, on the other hand, offers more flexibility, including early morning or evening sessions, and the crypto market operates 24/7, including weekends. This can be an advantage for someone who has a full-time job.
If you work a full-time schedule, you might not be able to day trade B3 (which occurs during business hours), but you can opt for swing trading on the daily chart or trade Forex/Crypto at alternative times.
Defining the Strategy
Within your trading plan, the strategy is fundamental. Will you trade:
- Trend (Trend Following)
- Range (Lateral Markets)
- Reversal
- Scalping (very quick trades)
You also need to define how many trades per day you will make and what your daily loss limit will be. For example, if your maximum daily loss is 5% of your account, you could split it into two trades of 2.5% each, avoiding putting everything on a single entry.
What to Do After a Losing Streak?
What if you lose several days in a row? It’s important to establish rules to stop trading after a certain number of losing days. For instance, if you lose 3 or 4 days in a row, it might be wise to take a break for a week. This helps you regain emotional balance and calmly reassess the market. It’s not just the trader who might be “off”—the market itself can be more volatile and less predictable at times.
All-Time Highs, Supports, and Resistances
How will you handle assets at all-time highs? Will you enter on breakouts of previous tops or prefer to wait for corrections? And what if the price approaches a Fibonacci projection or a significant resistance level? Your trading plan should include clear rules about entries, exits, and position adjustments.
Technical Indicators and Tools
Define which technical indicators you will use. If you currently use moving averages, volume, and RSI, don’t drastically change them tomorrow. Specialize in the chosen indicators to understand how they behave over time.
It’s also important to outline a scenario for the day. Even if you trade using 5-minute charts, take a look at the daily chart of the asset, the previous day’s closing, and key global indices (such as the S&P 500, DXY, Ibovespa, 10-year US Treasury yields, oil, etc.). A macro view can help predict the market’s direction.
Economic Calendar
Don’t forget to check the economic calendar. If important data is scheduled for release at 11 a.m., for example, avoid entering trades just before the announcement. Wait for the data to come out and then enter, already aware of the potential impact.
Conclusion
A good trading plan involves much more than just “buying when it goes up and selling when it goes down.” You need to consider the time you have available, the markets you will trade, the strategies you will use, your daily loss limits, how to react after a losing streak, how to deal with all-time highs, which indicators to use, and how to prepare for the day by considering the economic calendar.
All this makes the trading process more professional and reduces the influence of emotions. As a result, you increase your chances of operating consistently and efficiently.
If you want to invest or day trade, consider BTG Pactual, a partner of our channel, for access to a comprehensive platform. Good luck with your trades, and see you in the next article!
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