Trading Plan : Essentials of a Successful Trader

A Successful Trader must clearly know the entry method and be prepared to respond to the all types of market conditions. It is clearly defined and predefined that how to exit the trade, both with a gain or a loss.

So a Successful Trader must need to know :

  • The entry points i.e. the energy points or the price points which will confirm the trend or direction of the price move.
  • The exit points i.e. the energy points or the price points which will confirm the end of the trend or direction of the price move.
  • The protection mechanism to safe guard you in anything wrong happens which you have not anticipated.

If you are experiencing a serious string of losses then there is something wrong. Continuing  to trade in the same manner without any preset rules can result in a zero-balance account.

The reasons behind this situation are:

  • Executing trades when there is no entry level.
  • Not executing trades when there is signal occur.
  • Not having an exit plan for a win or loss event.
  • Allowing losses to exceed predefined amounts.

A detailed table is given below showing how much percentage of profit you require to recover a given percentage of draw down:

Loss of Capital in %age                  %age Profit required to get back breakeven

10%                                                                         11.11%

20%                                                                         25%

30%                                                                         42.86%

40%                                                                         66.67%

50%                                                                         100%

60%                                                                         150%

70%                                                                         233%

80%                                                                         400%

90%                                                                         900%

100%                                                                        Blow Out

So if you have predefined rules ie. a good Trading Plan, then only it will give you the opportunity to return to effective trading.

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