The Importance of Having a Trading plan

Your capital may be at risk. This material is not investment advice.

Introduction

Online trading has enabled investors to transact in currency and securities on a global scale. Many traders in South Africa have successfully made handsome profits while transacting online. These traders can definitely multiply this success by having a trading plan.

What is a trading plan?

The popular business adage “failing to plan is planning to fail” could never be truer than in a case of trading. Many online traders, even here in South Africa, have overlooked the importance of a trading plan and failed miserably. A detailed plan for online trading is important because it outlines the following key areas:

1. Strategy
2. Investment and risk
3. Market
4. Targets
5. Weaknesses

1.      Strategy
The most important element of a trading plan is the strategy that a trader wants to execute. This entails the what, when and where to buy and sell. Investment risk management, diversification of assets and targets must also be included in the strategy. Having a demo account comes in handy when testing these strategies.

2.      Investment and Risk
The ideal trading plan will track progress, investments and assets. With a trading plan in place, South African traders can easily identify the kinds of assets to invest in and even limit the amount of risk they are exposed to.

3.      Market
A good trading plan helps a trader identify the markets suitable for investment. Most traders in South Africa go for either binary options or forex. There are many brokers in both markets and new entrants to online trading should be cautious. Pointers like the top 5 binary options beginner tips can be helpful for ensuring the safety of their investments.

4.      Targets
A trading plan will help in setting manageable goals and targets. It is a common thing to see some investors like students trading online in platforms that require more than the capital they have. This has been detrimental with most investors making huge losses on such risky pursuits of profit.

Many successful South African traders have gone ahead to venture into commodities, stocks and indices with the help of regulated brokers like Banc de Binary and IQ Option. They offer their clients, a safe trading platform with a variety of features.

5.      Weaknesses
The weaknesses and limitations in the strategy will be clearer with a trading plan.  When a trader is aware of these weaknesses, he or she will know how to tweak the trading plan to counter the loopholes.

Conclusion

Having an articulate trading plan is an important thing for online traders in South Africa who want to be successful. Beginners in online trading must do enough research before venturing into the business. Newbies interested in binary options trading may find the top 5 binary options beginner tips and other pointers quite useful.