Trading Plan: all the rules to follow [Guide]
Published: 4 November 2021 by Andrew
Investing with a Trading Plan is equivalent to building a house after designing it on paper. You might still be able to build a house without a blueprint, but the result probably wouldn’t be that great.
Similarly you could invest without a trading plan but you could never aspire to become a real trader, able to make constant profits.
This “project” is unique for each investor, it depends on the character, style, available capital, objectives, time, etc. In short, you cannot use another investor’s trading plan, you have to create your own if you want it to work.
If you have never done it before, don’t worry, in this guide we will help you to make one step at a time.
When you have written this plan, you will have to test it on the Demo account of an online broker like eToro, which is safe and reliable.
Here is a summary table of the trading plan:
|❔ What is a Trading Plan:||A set of rules|
|🤔 How it is done:||Putting everything in writing and doing tests|
|📍 Where to use it:||On the best online trading platforms|
|💶 Capital to start:||50/250 euro|
What is a Trading Plan
Let’s start this guide by analyzing what a trading plan really is, so that you can structure one that’s right for you.
A trading plan is a set of rules that a trader is required to respect when trading on the markets.
Usually it does not only concern the trading strategy but also everything you need to make the environment right for investing, avoid stress and not be guided by emotions.
In fact, within a single trading plan we can find various strategies that come into action under certain conditions.
The plan must indicate:
- Money management
- Markets to follow
- Trading Indicators
- Stop Loss
- Take Profit
- Duration of operations
It is not simple but you have to imagine it as a road map, a guide that tells you what to do in every market situation, both before and during the trade.
A good trading plan will probably limit your operations a lot, but will make it more effective, avoiding entering the market just for the frenzy of doing it or for the euphoria of some particularly exciting news.
Those who do not use a trading plan are likely to “get lost” in the ruthless world of financial investments, driven by instinct and the fear of losing, which always lead to making some mistakes.
Trading Plan: the best platforms
A good trading plan begins with choosing the platform to use for investing and the online broker that best suits your needs.
Online trading is an investment method that requires frequent operations, so it is preferable to use CFD brokers, which offer a number of indisputable advantages:
- They allow you to invest small amounts
- They allow you to aim up or down
- They offer a Demo account to practice
- They also allow you to make small investments
Here are the best platforms to work out your trading plan:
Min. Deposit: 50€
Min. Deposit: 100€
Min. Deposit: 50€
Min. Deposit: 250€
Min. Deposit: 100€
72.30% of retail CFD accounts lose money
Min. Deposit: 250€
To choose the right Broker, you will have to test all the platforms we have listed, but if you want to save time, here are the descriptions of the best online brokers on the market, a good base from which to build your trading plan.
eToro is one of the most popular online brokers in the world, an extremely reliable intermediary that has also made its way into Europe, winning the trust of thousands of traders.
The more than 20 million subscribers to its trading platform only confirm the quality of this financial intermediary.
Through its trading platform you can trade on many assets, such as stocks, indices, commodities, currencies and cryptocurrencies, through Contracts for Difference (CFDs).
How do you create a trading plan with eToro?
- Register on eToro
- Log in to the Demo account
- Start testing by writing the rules of your trading plan
- Switch to the Real account by depositing at least € 50
If you want to delegate your investments to more experienced traders, in order to understand how traders who have already developed their plan invest, eToro has patented a truly revolutionary tool: Copy Trading.
This system allows you to copy the market operations of the traders you have chosen (on eToro) and to replicate them on your trading account. In this way you will get the same returns (based on how much you have invested) of the traders you have decided to copy.
Here are some examples of traders. Remember that past performance (which you see here) is no guarantee of future performance.
Past performance is no guarantee of future returnsClick here and choose which traders to copy
Trade.com is one of the most popular online brokers throughout Europe, which has also been able to stand out internationally.
The CONSOB license obtained is a certificate of absolute reliability and safety. But obviously it is not the only authorization obtained by the Broker.
The wide selection of stocks on its trading platforms allow you to trade on stocks, commodities, indices, cryptocurrencies, forex, etc. .
To start developing your trading plan we recommend that you start by studying the Trading Course created by the Trade.com team of experts. This pdf is completely free and will provide you with the basics of technical analysis, helping you to write those rules you need so much.
To download the ebook, just click on the link below:Download the Trading Course for free by clicking here
Trade.com offers its members two free trading platforms: MetaTrader 4 and the Web Platform.
To develop your trading plan on Trade.com you need to follow these simple guidelines:
- Register for free on Trade.com
- Choose the trading platform you prefer
- Log in to the Demo account
- Start testing and writing your plan
- Switch to the Real account by depositing at least € 100
Trading Plan: how to start
Starting to invest can be a dramatic or at least risky moment, because there is the desire to experiment but at the same time the fear of losing money.
Traders usually can’t wait to earn and therefore waste little time with theory, Demo accounts and strategies. They try to interpret the signals coming from some indicator and transform it into market entry signals, often without even evaluating money management.
You understand well that in this way the chances of becoming a successful trader drop dramatically.
So if you want to start creating a trading plan that suits your needs, you must first devote yourself to studying, download and study the best trading courses available on the market and test only in Demo, there is time to use real money, do not rush !
If you can resist the temptation to use your money right away, you are well under way. Here are the rules to follow to create your trading plan from scratch.
Trading Plan rules
Take your time, the trading plan should not be written in a rush. So to elaborate it we have prepared a series of rules to be respected, which will guide you to draw up your “vademecum”.
You can use both your PC and pen and paper but the trading plan must be put in writing and must not be a simple list of points, it must describe why to make one choice rather than another.
State the motivation that drives you
Whatever the reason that drives you to become a trader, write it down, it will keep you focused on the goal.
Set the timing
Write down immediately how much time you can devote to trading each day, at what times and how you will use this time.
State your goals
At this point you have to write down the goals you set yourself to achieve with trading. To write them follow these simple rules that help you to be more precise.
These objectives must be:
- Achievable, you can’t get rich in a month or even 6. Try to be realistic.
- Applicable, such as buying a house. Something real and not virtual like being rich.
- Measurable. What percentage of annual return do you want to achieve? You have to be specific.
- Timed. Write down how quickly you want to reach the goal.
Set the trading style
Trading style is important and you need to choose the right one for you. For example, if you can dedicate 1 hour a day to trading, you cannot do Scalping or Day Trading, which need more time to prepare and execute the necessary strategies.
The main trading styles are:
- Position trading. A long-term strategy, which focuses on open positions for weeks, months or even years.
- Swing trading. A strategy that follows market fluctuations and usually manages daily or weekly positions.
- Day trading. As you can guess, this style involves opening and closing positions on the same day.
- Scalping. A very quick style, not suitable for everyone, which is based on positions that last a few seconds or at most a few minutes.
Set the risk level
Write down what risk you are willing to take on each trade and always place the relevant Stop Loss.
You also decide on the minimum profit target that determines the (partial or total) closure of the operation, which is usually at least 1.5 times higher than the risk. Again set the Take Profit.
In a trading plan, the strategy can also include the use of the trailing stop, but it is much more difficult to measure.
Decide which assets to choose
Some strategies and trading plans work best with certain assets or very volatile markets, so define your target market precisely.
Set up the actual strategy
Now you have to write the strategy. The indicators to be used, the settings and signals that determine the entry and eventual early exit from the market, even when the goal has not yet been achieved.
Practice on a Demo account
Before you try your hand at real trading you have to do a lot of tests in Demo. These tests serve to optimize the strategy and the various details of the trading plan. You don’t have to be in a hurry!
Record all data
If you want to make the most of the tests in Demo you must be scrupulous in recording all the data deriving from your trading plan.
Don’t be afraid to write about failures and failure to achieve set goals. It is impossible to get a trading plan right from the start, it takes time and a lot of patience.
As long as the data is not constant you will not even be able to think about switching to real trading.
Learn to manage the mood
Self-control and the management of anxiety and emotions make the difference between a beginner and a professional more than the strategy used.
You have to learn to manage emotions, even if in Demo they are very minor, but you still have to learn to understand and control them, because they are the ones who often lead to making the most serious mistakes.
We have provided you with all the instructions you need to create your trading plan from scratch, at this point you should choose which Broker to use to start putting it in writing.
Below you will find the links to access the Demo accounts of the best online brokers on the market for free, start here:
- Log in to the eToro Demo account by clicking here
- Access the Trade.com Demo account for free with this link
A set of rules for trading on the markets.
It should be put in writing, listing the rules and strategies to be used.
It must be tested on a Demo account, in order to correct and optimize it.
Better to use an intuitive platform like that of eToro, a truly reliable broker.