A Successful Trading Plan – How Important is it?


If you are an online trader and deal in financial markets, then you should know the saying that should be followed all the time – “plan your trade and trade your plan.” This is also true for trading stocks and shares.

One of the best things investors can do is to start right during the weekend. You have to look for major economic events that are going to take place during the week and the effect it will have on the prices. You must check which stock will be affected the most and in what ways so that you are able to devise an effective and successful trading plan.

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Choosing What to Invest in

When it comes to trading stocks and shares, it is important to choose the right place to invest. There are some offers which perform extremely well, while some don’t. So if a trader has an interest in a particular offer, he must find out whether his broker offers that or not. Those are divided into different categories and there is a range of factors that affect their performance.

Out of all, the financial market is very lucrative and most of the time it is the stocks that perform extremely well. For short term trades, shares are preferred. But, you must keep in mind that longer expirations tend to be safer and they must not be ignored as profitable options. There are a number of factors that affect the way in which the price move and this is the reason it is at times difficult to trade on the market.

What to Trade?

Once you have decided on the amount that you want to invest for that week, you must decide on the stocks you want to invest in. You must choose the one you think will do well during the trading week and then divide your investment among the different options. You should not invest all your funds in only one option because there are times that the option may not perform as you expect. So if you lose on a trade, you will lose on all the others because you have chosen the same one.

Choosing the expiration time is also as important as choosing the option. When it comes to trading, you must choose longer durations such as end of week or even end of month expiry times. Avoid choosing short term expirations because this carries a bigger risk. If you are a disciplined trader, you should not have any problems in waiting for a week or two after opening a trade.

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An Example

If a company in the US is looking to purchase a company in Europe, then the payment has to be done in the local currency which is Euros. This will create a demand for Euros in the market. Although the entire amount will not be bought on the market, the banks will buy the currency to average the agreed upon price.

How Much to Invest?

You should also plan very carefully how much funds to invest on your trades for that week. It is not a good idea to invest everything that you have in your account in a single week. Trading has its ups and downs and it must be understood that if you are successful one week, you may not be successful the other week. Your aim should be to stay in the industry for a long term which is only possible if you have funds and if you are disciplined.

Federal Reserve Mandate

Under the Federal Reserve Mandate, the inflation rate has to be kept close to 2 percent and more jobs have to be created. These two factors influence interest rate decisions and it is also worth noting that the interest rates and the stock market trading has a direct correlation. If the interest rates increase, the stock prices go down and if the rate decreases, the stocks go higher.

If traders are looking to incest in oil and gold, then they must again have a trading plan. Traders must check the economic calendars and find out when oil inventories are released. The OPEC meetings do not usually have an impact on the fluctuation of oil prices.

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