Trading Plan is a method for evaluating market, determining the degree of risks involved, and formulating of short-term, mid-term and long-term investment objectives. There is famous saying in business, 'Fail to plan and you fail to plan'. These words are backbone of any kind of business. Any successful trader will tell you that plan systematically or get ready to get out of the market.

The effective trading plan includes several essential points. A trader must have skills. Trading is battle of nerves. Weak hands loss and traders having stronger skills cash out profits.

It's necessary for a trader to pre-define risk reward ratios and to locate the minor, major support and resistance levels properly. Mostly traders don’t pay attention to set reward ratios and become greedy and their greedy nature lead them to loss their positions. So to trade successfully, the trader should be able to analyze the market properly and must set as far as possible accurate entry and exit points.

Many people think that trading can be done by just defining some rules. Trading is not a static thing. It is all about situation and must be dealt accordingly.

A real trading plan is just like game of chess. You need to plan your objectives and goals. You must plan accurately how to achieve your goals and objectives and must learn stress management.

Follow certain rules to make effective strategy.

Trader must be mentally prepared to face loss and he must set risk level that he can afford to take. Make sure that you are using the capital that you can afford to lose without affecting your life.

You must understand the reality that every trade is not a winning trade. So prepare yourself mentally to accept the loss. Especially at the start of trading career, there are more chances to loss due to lack of knowledge, lack of command, and lack of proper planning. You must be able to accept uncertain situations. Anything can happen. Situation can go against you. But there isn’t any need to worry. Work consistently. Make effective plan as much as you can make. Select quality trades and let them work for you.

Learn to react according to market situation. Put your best efforts to makes effective plan but you must have always pan B. If your first plan doesn’t seem to work for you, then there isn’t any need to stick with that plan.. Conduct plan B and react to market accordingly.

You must know how many trades you should open per day, per week or per month. Plan your month in advance. Too much opened positions can lead you towards loss. Trade less and get more winning positions and accuracy.

Determine how to maximize your gains in short period of time by following certain trend movements. Identify the market trends and try to evaluate the potential of that particular trend. Determine which situation can prove be ideal for your strategy. Breakouts and pullbacks are considered ideal set ups .Try to set low risk set ups.

You must define the risk that you can take per trade. The best way is to use one to two percent of your capital for per trade and use stop loss properly to avoid big loss.

Don’t try to enter in trade with full stake. As price moves in your favor, leave limit order at retracement to maximize your profit.

Determine your trade management criteria. There is no pre defined formula when to fold, when to hold. Your main objective is winning trade. Cut your losses as efficiently as possible. You need to explore what best suits to your strategy .Pre-define profit targets, volatile targets, stop loss.

Keep monitoring all your strategies, ratio of you winning and losing trades. Locate the areas which work well for your strategy. If ration of your winning trades is lower than losing trades, re-define and out deficiencies in your strategy.

Stress management is the base of any kind of your trading strategy. You must know your own beliefs, market actual conditions and how the world works out. Usually we tend to follow only our own believes and neglect the actual behavior of the market. We need to learn to understand the market behavior instead of keep sticking to our own beliefs.

If you are afraid to lose, if you are pressurized to win trade, then this psychological pressure will have negative effect on your trade. You will not be able to analyze true market conditions, fluctuations. You will look at the market only from your own perspective. So you will be no more able to react according to market situations.

Good physical health is good for mental health. If you are not in proper position, avoid in entering trade.

Try to be disciplined in executing your plans and strategies.

Once you have planned strategy, try to be systematic in decision making.

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