Many traders get into trouble when they trade on emotions instead of rules. Trading without a specific trading plan can create bad habits. Shockingly, many traders don’t have a trading plan. By contrast, most professional traders will prepare for the market day with a set plan before the market opens.

A good trading plan can be broken down into three important parts:

1. Include a trading strategy or method. Any good strategy should include market entry/exit strategies depending on the markets traded and current market conditions (stocks, options, Forex, etc.) and the various market conditions.
2. A specific risk management rules with clear and understandable risk levels including position size calculations in order to control the risk with each and every position entered.
3. A regular and repeatable routine. The more consistently a trader follows a set routine the more consistently will be the implementation of a good trading strategy. Several traders have told me recently their biggest problem is not finding a good strategy, but implementing a consistent routine is their biggest challenge. Once a routine is carried out consistently, trading success will become much more likely depending on the market strategy.

A routine is best written down as a checklist so that it is simple and repeatable. Each individual trader needs to adapt a checklist to his or her own individual needs. The checklist below is a potential outline that will get a new trader started. Modifications should be made depending on the trader preferences, type of trading (e.g. day trading, swing trading, position trading) and trading experience.

• Check/read newsletters from paid/unpaid subscriptions from signal service, news, analysis, etc.
• Check the day’s economic calendar for any scheduled reports and announcements for the day; this part covers the fundamental analysis. Check the expected numbers against reports that will be published during the day.
• Check the charts for price action; this is mainly for a trader who trades using technical analysis. Normally, check to see if the prices have violated any support/resistance areas. For technical trading, some of the most popular indicators and tools used are:
• Support/resistance areas (e.g. daily, weekly, monthly)
• High/low/open/close and candlestick patterns
• Indicators, such as stochastics, MACD, RSI, momentum, volume, etc.
• Check Fibonacci retracement levels.
• Write down thoughts while going through checklist. This step is for the trader to write out trading ideas for the day, how much to risk , where to take the position, where to exit, and how large the position size to take.
• After the trading session is over, or after the trading day is complete, it is important to document or journal each trade, with entry, exit, profit, loss, risk in trade, justification for entering, etc.

Once you have a good daily checklist that you are following, it is important to use it daily. This will help you be a much more consistent trader with, hopefully, more consistent results.

So, if you don’t have a trading plan, make a written trading plan with a simple, easy-to-use checklist, and keep a daily record or journal of all trades.