Stock Market Strategy are massive advocators of the trading plan so if you haven't devised your trading plan yet DO NOT PUT ANY MONEY IN THE MARKETS!
A Trading plan gives you fixed parameters to work to and it also allows you to identify opportunities that you are comfortable with trading and that have a proven profitable edge. The single most important thing about a trading plan is that it can help you understand where you're making mistakes.
Mistakes in your plan can be due to a number of different things:
Not taking every signal
Forcing a trade on because it is close to your set up
Taking profit too early
Letting losing trades run past your initial stop loss
These are some fundamental reasons why new traders fail. Even if you have a trading plan, mistakes can still happen as it is still down to human intervention and perception of what you're seeing on the charts. If you are making the mistakes above with a trading plan you will be able to identify these mistakes faster than someone that does not have a trading plan which will almost certainly have a positive effect on your trading.
Great positives you can get from a trading plan are:
Identify more strategies to trade from the analysis of existing planned trades
Identify if you can tighten stop losses and increase profit targets
Faster entry signals
Eliminate losing trades from your strategy
Know when to increase and decrease position size
I hope you can see the benefits of a trading plan and how fixed rules are there to follow. However, the other side to a trading plan is so you can improve your existing system/strategy and develop more trading strategies that can make you further profit in market conditions that you would not normally trade in. You can find more information on what you should be doing as a trader by reading this article: 10 Steps to Trading
Market Analysis Video
Brief Market Update
Yesterday we witnessed another up day in the stock market with it running in to the overhead resistance that we have been pointing out in our videos. Questions we ask ourselves as traders are things like what is the statistical possibility for the resistance holding or breaking and is this a good area to be looking to enter based on risk to reward money management profiles?
We take a closer look at the relative strength indicator in the video and what to look for when using the indicator against the market, plus the profit comparison of trading a stock with stronger relative strength.
VLO, a stock that is on our radar has got a nice looking daily chart and is relatively strong compared to the market so we are keeping an eye on this one for some potential setups.
If you have any questions relating to this market update or wish for us to talk about a trading subject that you're interested in, please don't hesitate to contact us.