Trading Techniques  |  MAR 2009

The Trading Plan by Cory Mitchell

The Trading Plan by Cory Mitchell When creating a trading plan, you have to take into account all the possible contingencies. Here are the steps you should go through when designing your game plan. Atrading plan is your carefully thought-out and tested way of approaching and beating the market over the long term. It is the course of action for entering, exiting, and managing your trades so that all contingencies are considered before a trade ever takes place. With such a plan, emotions are left out of the trading equation, and only tangible criteria are used to make trades. Emotions can cause many problems in trading, including entering trades out of boredom, entering trades too early or not at all because of anxiety, staying in trades after profits should have been taken due to an emotional attachment to a tradable, or exiting too early and for a minuscule profit when it should have been left open longer. THE BENEFITS Having a trading plan will allow you to navigate different circumstances methodically and logically. This process can be repeated, tested, and then altered if results are not up to your standards. If you trade based on emotion, you will not be able to go through this process because your emotions will always get in the way and you will react accordingly. Problems can be avoided by not having to trade on reactions to the moment. The market is in constant flux, which in turn means emotions can be in constant flux. Well-laid-out trading plans will allow traders to avoid this barrage of emotion as they will know in advance how to handle each situation as it arises.

by Cory Mitchell, CMT