E A Day Trader's Business Plan

Many traders begin their trading life by studying books, learning online and perhaps enrolling in a course or two.  They open a demo account and get a feel for their trading platform, begin trading with their demo account and after some time become confident enough to deposit funds into a live account and trade for real.  Many traders feel this is enough and they eagerly begin their new career and laptop lifestyle.

The reality is that trading has many arms or skills needed and to be consistently profitable you need to understand all of them.  The psychology and emotion of trading are perhaps the two biggest factors for a day trader.  Without an understanding of your own psychology and how you handle both your losses and your wins, it’s going to be a tough road.  Emotions equally play into this and the ability to understand your emotions is key.  These are complex subjects and can be discussed for hours.  Obviously, the art of trading itself is hugely important, technical analysis is my preferred style so learning chart patterns and how to use various indicators is something that takes time and comes with experience.

The part that many traders think is not so important and often decide to skip is putting together a trade plan and keeping a trading journal.  I strongly disagree with this and think that it’s as important as any other part of trading and without it, you stand a bigger chance of failing as a trader. 

A trading plan is as important as a business plan for any other business.  If you were to setup a new business as a retailer, you would research what products you are going to sell, how you are going to sell them, what your costs are, what your profit margins are, how you will ship your products, how will you market your new business and finally, how much you will sell each product for.  Without considering these basics, it would be unlikely that your new business will be successful. The idea that you would buy your products and add them to your new online shop without knowing at what price you need to sell them is obviously crazy.

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