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Why Keep a Journal of Your Trading and a Free Template

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Why Keep a Journal of Your Trading and a Free Template

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Too often we hear from struggling traders who ask what they can do to improve their trading. The questions I always ask in response are, "Did you follow your trading plan?" and "What trades are, or aren't, working for you?". We discuss trading plans in a separate blog post, but a trade journal is a separate and equally necessary tool in your trading arsenal.

What is a trading journal? A trading journal is a tool used to track every one of your trades. Using a journal is essential to improving your trading and simply knowing what works, and what doesn't work, for you. This applies to your overall strategy, the individual stocks traded, and even the time of the day. The key is being able to see exactly where you made or lost money.

If you were a baseball coach and you knew one of your players batted .350 against left handed pitchers and another batted .190, you'd know exactly which player to start if you were facing a lefty. The same applies to trading. If you have stats from a trading journal to know what works or doesn't work, you're far more likely to repeat winning trades or strategies. Without careful records there's no way to know if your strategy is working or not, let alone having the ability to refine it.

Your journal can be as simple or as complicated as you'd like. There are obvious columns like the security, price purchased and sold, date purchased and sold, and your profit on the trade. Other columns are up to you. I would consider a column for the time of the day, stock sector and a notes section for anything worth remembering about that particular trade. Your note might be something unusual about the sector, the time of day or what happened after you exited the trade. The key is to put it down in the journal so that you can learn from your success or failures.

Taking it down to the basics, here is a link to one of the best P/L spreadsheets I've seen. It also has a link to download it if you'd like. I'm attaching it here with permission from Twitter user @inefficientmrkt https://inefficientmarket.tumblr.com/PandLspreadsheet

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Why Keep a Journal of Your Trading and a Free Template - Cobra

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Too often we hear from struggling traders who ask what they can do to improve their trading. The questions I always ask in response are, "Did you follow your trading plan?" and "What trades are, or aren't, working for you?".

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"Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success." -Pablo Picasso
Know this: A winner against your rules is really a loser.

One of the worst things that can happen to a trader is to win on a move that goes against his/her trading plan. When you are undisciplined and are willing to go against your trading plan and benefit from it, chances are you will most likely do it again. This can be very dangerous. In reality, you are better off suffering a loss while deviating from your plan in order to drive that negative experience into your mind hopefully preventing you from doing so again in the future. Make anything that falls outside of your plan and strategy absolutely off-limits.

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Are You An Undisciplined Trader? - Cobra

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"Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success." -Pablo Picasso Know this: A winner against your rules is really a loser.

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Locate Shares Of Hard To Borrow Securities

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Locate Shares Of Hard To Borrow Securities

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Locate fees will typically run between 1 and 5 cents per share. In addition, there may be locates available with no upfront cost if you contact us before utilizing the locate tool.

Here's how to launch the locate tool in Sterling Trader Pro:

In the main tool bar click Windows → Locate Monitor:

In the Locate Monitor window enter the quantity, symbol, the account you wish to short, choose LOCATE for Destination and click Send.

If the security is available you will see this message. Click Accept to agree to the fee and make the shares available to short. Click Decline if you do NOT wish to pay for the locate and have the shares available to short. NOTE: Upon accepting the shares your account will be charged regardless of whether you short the shares. Also, acceptance of the shares does NOT place an order to short them for your account.

Once you accept the shares you will see a status update to Filled and the shares are available for you to short. If you receive a reject message and want to check why the locate was rejected you can follow the steps outlined below.

Step 1, enter the locate.

Step 2, receive the rejection message.

Step 3, double click the reject line in the Locate Monitor.

Step 4, note if it says Stock is ETB in this area you are free to short the stock without paying the upfront fee.

Request (Do NOT leave the shares blank on first request):

Locate (The request is not complete until you see Accepted in the Notes column):

Sterling and DAS allow traders quick access to short locates along with the additional resources available at Cobra Trading. We invite you to contact us and discuss the ways Cobra can best meet your trading needs and earn your business.

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Locate Shares Of Hard To Borrow Securities - Cobra

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Locate fees will typically run between 1 and 5 cents per share. In addition, there may be locates available with no upfront cost if you contact us before utilizing the locate tool.

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Five Things to Consider When Comparing Brokerage Firms

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Five Things to Consider When Comparing Brokerage Firms

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Whether you're a new trader looking to get started, or a seasoned investor searching for a new home, the task of finding a brokerage firm is rarely an enjoyable one. Sure, there are some common priorities which spring to mind immediately (i.e. investment options, reputation and regulatory memberships, insurance on deposits, etc.) but there are other factors involved which can be equally important. In this post we'll explore some of these other variables which may sway your decision one way or the other when undertaking your next brokerage search.

Let's start with the elephant in the room, commissions. What is it going to cost to execute a trade? Perhaps surprising to some, commissions and the cost to execute the trade are not equal in most cases. Commissions are the portion of the total cost to execute a trade paid to the brokerage firm for providing the ability to effect the transaction. There are various commission structures used by different firms with two of the most common being per trade (E*Trade, Charles Schwab, TD Ameritrade/Scottrade) and per share (Cobra Trading, Tradestation, Interactive Brokers). While both models have advantages and disadvantages it is readily apparent if you're trading smaller share quantities per trade, such as 1,000 shares or less, it can be advantageous to go with a per share plan. Using Cobra Trading's highest per share cost as an example, the commission for a 1,000 share execution would register at $4.00 compared to $5+ at a per trade firm. However, as I stated above and will discuss below, the commission portion of the cost doesn't tell the entire story.

Where a trader routes orders, and the associated pricing, is probably the most overlooked cost associated with trading by both new and experienced traders alike. Adding or removing liquidity is a topic which can be convoluted, confusing and intimidating but the basic concept is this; if you add liquidity to a route venue's book (buying with limit below the bid or selling with limit above the offer) you may be eligible for a rebate whereas if you remove liquidity from a venue's book (buying at or above the bid or selling at or below the offer) you are likely going be charged for removing liquidity. Many large brokers will remove this layer of cost uncertainty by limiting where a trader can route orders. They do this by having a trader route the order directly to their trade desk and they handle it from there either by internalizing the order, routing to a venue which pays them for order flow or working the order using a cost neutral strategy. In almost all instances this will end up costing the end customer either in poor execution price or lost liquidity rebates. Alternatively, Cobra Trading provides a host of various routing options and fees along with the pass through of liquidity rebates to help give you choice and reduce the overall cost of trading.

Much like liquidity rebates, the availability of short locates for traders who wish to profit when a stock price falls differs vastly among different brokers. In order for a trader to effect a short sale their broker needs to secure the shares to short and brokers go about this in different ways. Some will provide shorts only for their own inventory while others may cap the stock price by which they allow shorts at $5 or $10 or above. However, there are many different stock inventories and short locate services to which a broker may look to secure the locate for short shares and Cobra Trading puts forth the effort to contact as many as we can in order to find shares of any company you wish to short. This extra effort leads directly into another overlooked aspect when comparing brokers, customer service.

How often do we receive truly exceptional customer service? Taking it a step further, how often do we receive truly excellent customer service from our financial institutions? When working with a large broker there will understandably be phone directories, hold times, security questions, case numbers and any number of other items utilized by big brokers to place metrics on how well their customer service is working. We can all understand this as necessary in today's business environment. However, understanding and accepting are two vastly different approaches to choosing a broker. Plain and simple, these frustrating aspects of working with a large broker can potentially, and sometimes do, cost you money. Cobra Trading strives to have a broker who can assist you answer every phone call on the first two rings, every live chat within seconds and every email within a single business day.

Lastly, let's touch on the slightly boring, but sometimes highly relevant, topic of margin interest. Many brokers will allow you to trade using margin and under these margin agreements they will charge you interest anytime you use the margin load to hold positions overnight. This margin interest rate usually fluctuates with the rates set by the Federal Reserve but even still it can vary significantly from broker to broker. If a trader routinely holds positions overnight using a margin loan it is definitely worth looking into how your rate compares with other brokers. Even lowering it 1% could potentially save substantial money over the long term.

In closing, it isn't fun or glamorous but if you're trading with a broker or looking to get started these are important items which might not otherwise have been high on your list of priorities. Knowing the commission structure, routing fees and margin interest fees could provide peace of mind and save on trading costs over the life of an account. Also, having a dedicated customer service team to answer questions and go the extra mile to find shares for you to short could also be a key piece to finding the right home for a trading account. If these topics haven't been considered lately it might be time to take another look. Prosperous trading to all.

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Five Things to Consider When Comparing Brokerage Firms - Cobra

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Whether you're a new trader looking to get started, or a seasoned investor searching for a new home, the task of finding a brokerage firm is rarely an enjoyable one. Sure, there are some common priorities which spring to mind immediately (i.e. investment options, reputation and regulatory memberships, insurance on deposits, etc.)

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A healthy approach to investing requires knowledge and expertise, as well as a reliable platform. Thoroughly researching a company prior to investing is important, as well as choosing the right companies for your interests and financial goals. Avoiding fads and private companies, a diversified portfolio is the best way to secure your financial stake against any market downturns or industry-specific collapses.

Be Realistic and Optimistic

The first step to healthy investing is to acknowledge the current market conditions. Understanding current conditions help you choose the best possible investments. However, your investments do not need to be entirely made with a somber attitude regarding current financial affairs. Even if a company is brand new and growing, there could easily be a large market for it in the coming years. Keep an eye on market trends to predict whether a company is likely to fail or flourish.

Acknowledge Personal Finance Goals

Everyone has different financial goals. Acknowledge your own finances and do not invest money you cannot afford to lose. Investing always carries a certain amount of risk and no company is fully guaranteed to be successful long-term. It's important to be honest with yourself when seeking out new investments, as trying to find the next big company is always a risky endeavor.

Unfamiliar Companies

Before investing in a company, it's important to make sure you understand how a prospective company operates, what their goals are, what their obstacles are and any other relevant information. If you blindly invest in a company without knowing anything about it, you are engaging in speculation. Speculation is akin to gambling.

Untrustworthy Management

Unethical leadership is a common occurrence in every industry. A company may appear to be doing well or operating efficiently, but it may also be suffering from corrupt executives who are cutting corners, engaging in poor business practices and other undesirable activities. When corrupt activities come out publicly it is always the shareholders who suffer the most. A company is only as good as those who are leading it, therefore, it is pertinent that you fully inspect the management of a prospective company.

Detecting Untrustworthy Management

There are several ways to seek out information on the management of a company. Clarifying who the executives of a company are and inspecting their past work experience is the best way to evaluate a company's management. If executives have engaged in poor business practices throughout their past careers, they are more likely to be actively engaging in them at their current company.

A CEO's ongoing communication with their company's shareholders is another way to evaluate the management of a company. If a CEO is continuously upfront and honest about any problems their company faces, they are likely to continue presenting all necessary information to shareholders. In contrast, if a CEO is consistently vague about their company's issues, they could be withholding pertinent operational information.

One last way to evaluate the management of a company is to look at a CEO's salary. Consider the financial statements released by a company, compared to CEO salary and bonuses. If a CEO is receiving massive paychecks and bonuses without making any progress or pushing the company forward in any way, it may be an indicator of an untrustworthy or complacent CEO.

Private Companies

Some companies choose not to become publicly traded for a long time. Investing in a private company can result in large losses and little recourse. If you're interested in a company and it is not publicly traded, the best approach is to add the company to your watchlist and pay attention to a possible IPO in the future. A lucrative public buying opportunity may present itself in the future.

Trendy Companies

As with most trends, investing fads come and go. Do your research and consult with others before investing in a trendy industry. These types of investments can be fun and very lucrative, but they can also result in spectacular market collapses, such as the dot-com blowout in 2000 and the silver meltdown of 1980. If you wish to invest in trendy companies or industries, make sure the majority of your portfolio consists of solid, well-researched companies, securing your overall financial stake against any potential market downturns.

Exit Strategy

If one of your investments looks like it may go downhill at some point, make sure you have an exit strategy in place. This does not mean you must immediately liquidate all shares in a company, but it does mean you should have a plan for mitigating any losses in your portfolio. A diversified portfolio, with investments in a variety of companies and industries, is the best method for mitigating any individual stock losses.

Before investing in a company, it's important to thoroughly research and investigate. A reliable platform that allows you to evaluate each prospective investment is the best way to choose companies. While crafting a diversified and top-performing portfolio, your main goal should be to grow your money steadily and secure your overall financial stake against any market downturns or industry-specific collapses. Providing effective tools for new investors and expert traders, learn more about investing with Cobra Trading.

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Smart Tips For Healthy Investing - Cobra

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A healthy approach to investing requires knowledge and expertise, as well as a reliable platform. Thoroughly researching a company prior to investing is important, as well as choosing the right companies for your interests and financial goals. Avoiding fads and private companies, a diversified portfolio is the best way to secure your financial stake against any market downturns or industry-specific collapses.

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If you are planning to invest, your main goal is definitely to earn some income. When you want to invest, you must have a brokerage account. Brokers are important as they simplify investing. For younger investors, however, the first question that crosses their mind is how to choose their first broker. Older investors spend no time pondering on this question as they already know what to consider.

Before we go into details on the entire process, let us first understand who brokers are. Basically, there are two types of brokers. We have regular brokers and broker-resellers. The former have direct contact with their customers while the latter act as middlemen connecting the customer to the main broker. And although it is advisable to deal with direct access brokers, there are still some broker-resellers who are very genuine.

Discount broker vs. full-service brokers

When you are planning to invest, you must decide whether you want to deal with a discount broker or a full-service broker. When you approach a full-service broker, you are assured of getting access to your account. Moreover, such brokers also provide other services such as retirement and financial planning. You will also get investment advice from your broker when you are dealing with the full-service one. Most of the times, people entrust all their investments to their full-service brokers and learn about the performance of their investment through monthly statements sent by the brokers.

While investing, you may also choose to deal with a discount broker. This broker is unlike a full-service broker that will provide you with many services. When you follow the advice of a discount broker, you are more likely to make huge benefits than a person relying on a full-service broker. Moreover, you can know so much about investment from such an investor. Consulting a discount broker is the first step toward getting direct access trading and becoming a great trader.

Fees

Although full-service brokers provide many services to their clients, they also charge hefty fees. To make matters worse, not all brokers are good meaning and the earnings from your investments may end up only paying the fee. The broker may also give you bad advice making it hard for you to earn from your investments. You may also land a broker who is only interested in making earning commission from your account and not assisting you to make good money.

Discount brokers provide fewer services than full-service brokers. Consequently, their charges are much lower. Furthermore, they provide their customers with essential services that are especially helpful in making wise investment decisions. For instance, they teach on opening an account or moving money. They can also assist you to invest in areas that require minimal experience but have good returns such as mutual funds.

Other factors

There are other important factors you should consider when you are choosing your first broker. Some of these include;

The withdrawal process and charges

Even after investing your money and making huge profits, sometimes it may a bit hard to withdraw your cash. Yes, it is your hard-earned cash and you have the right to get it, but there is someone who wants to hold our money. Not all brokers approach this issue the same way. Some brokers will charge a fee while others will not allow a withdrawal of a certain amount as your account balance will go below the minimum. It is advisable to make sure you understand all the rules of a given broker before putting your money there.

Whether they are registered

It is important to ensure that the broker you are dealing with is registered by the Financial Industry Regulatory Authority (FINRA). FINRA is an autonomous agency that licenses and creates rules that govern this sector.

Consider the fee structure

Although many brokers have fee schedules that resemble each other, it is not surprising to come across a few with complex fee structure. Most broker-resellers have such fee structures making it hard for investors to identify hidden costs. Make sure you understand the fee structure before investing with a broker.

Check whether the broker is covered by the Federal Deposit Insurance Corporation (FDIC)

You should make sure your broker's certificates of deposit, money market account, and savings accounts are covered by FDIC. Dealing with a broker who is not covered is putting all your investments in a great risk.

Given that there is that risk of losing your investments, there are some brokers that provide additional protection to their clients. For instance, some of the brokers that follow the Customer Protection Rule ensure their minimum cash reserves can cover the amount owed to customers. Dealing with such brokers can enhance your success.

Are you planning to start investing any time soon? Don't just sit down as other people like you are making an income from their investments. Feel free to try our services. We have the right tools and personnel and the best stock trading software to help you make prudent investment decisions. We know that you want to earn from your investment and put together everything we can to ensure you realize this dream.

To find out more about investment, feel free to us now.

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If you are planning to invest, your main goal is definitely to earn some income. When you want to invest, you must have a brokerage account. Brokers are important as they simplify investing. For younger investors, however, the first question that crosses their mind is how to choose their first broker.

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"In the market, the fear of losing one's fortune is every bit as intense as the fear of losing one's life from an attack by a wild animal. I don't think I could put the difference between consistent winners and everyone else more simply than this: The best traders aren't afraid." Mark Douglas - The Disciplined Trader.
Scared Money is, simply put, money that you should be using for something else other than trading. This might be groceries, it might be a mortgage payment or it might be your child's scholarship fund. This money has no business being in the market. If it is, you're so scared of losing it that your judgment is clouded when it comes to any trading decision. Without a neutral state of mind, you're often going to be late catching the move or exit too early.

How does one avoid this? The money you trade with has to be set aside "risk capital". This is the amount you can trade with because you've accepted risking this money. You know that no matter what happens to this money, you've met your obligations elsewhere and nothing will change with your day-to-day if this money is gone next week.

Does that mean to trade with reckless abandon like so many traders do? Absolutely not. However, without fear in your trading you can focus on what matters most, trading. Implementation of your trading strategy, plan and money management discipline can only become second nature if you've overcome the fear of losing it all.

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"In the market, the fear of losing one's fortune is every bit as intense as the fear of losing one's life from an attack by a wild animal. I don't think I could put the difference between consistent winners and everyone else more simply than this: The best traders aren't afraid."

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Risk Management

Risk management is a vital part of day trading. Just like a solid trading plan, adequate risk management is meant to protect you from blowing up your account on accident. Don't have a trading plan in place? !

How should you calculate your risk?

Before you enter the trade, you should realize how much money you're willing to bet and how much of it you're prepared to lose. Some people prefer to go by a percentage of their account, and some prefer a flat dollar amount that they're comfortable with.

Either way, there's no right or wrong way to set your risk. However, you should realize that your risk is the money that you'll lose if the trade goes wrong. For a beginner trader, it may be a very small amount, and that's totally ok.

As you're practicing and learning, you may lose at first, maybe even significantly. Your risk should be low enough that you can afford to lose multiple times in a row. It may be unlikely you'll lose 50 times in a row, but you and your account should be prepared to withstand that kind of loss if you want to get the hang of how day trading works. To simplify, let's say that your account is $100. If your risk is low enough, for example, only $1, and you lose 50 times, you'll still have $50 to trade with. It's not going to feel great, but at least you can recover from it.

What could go wrong?

And if you're risking too much, one bad trade could shut your account down. There are some events that we call Black Swans; it means that something so unexpected and devastating has happened that the stock market, or a particular stock, was affected dramatically. If you get caught in one of those events, and you're risking too much, your account may be gone with a single trade.

Another thing you should be aware of is slippage. It happens when the stock price changes in the blink of an eye. Let's take an example where you enter the trade at $1 and risk 10 cents. By the time the price drops to 89¢, you should be out. However, in some cases, the price can drop to 70¢ within seconds, and you simply won't have enough time to react. That may not happen regularly, but it does happen, and you need to be aware of it.

If you're just starting to learn about day trading, you're bound to make some mistakes. That's how we get better; that's what we do as humans. But that's also why you need risk management. It is there to protect you and help you exit the trade before any serious damage is done.

In the beginning, day trading can be very emotional. Until you gain enough knowledge and experience, you may be guided by your feelings. Fear of missing out (FOMO), frustration, boredom, revenge - all these emotions are in charge if you're not paying attention or don't have a system to follow just yet. This is why you need to be mentally prepared for any scenario and know exactly how you're going to end the trade if it goes against you.

Risk management and a day trading plan are your best friends in this game. Stay tuned for more information about day trading. And if you're ready to dive in, open an account with Cobra Trading!

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Risk management is a vital part of day trading. Just like a solid trading plan, adequate risk management is meant to protect you from blowing up your account on accident. Don't have a trading plan in place? ! How should you calculate your risk?

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Short Selling

Most people assume day trading is buying a stock at a low price and selling it at a high price. It may be that, roughly, 90% of traders buy long. This is just a more commonly known way to trade on the market.

However, you can also make a profit by placing a bet against the stock. All you need to do is sell the shares high and buy them back low. That is called short selling. Basically, you are betting the current price of the stock will go down. Short selling makes sense when a stock has negative news or any other kind of negative catalysts.

Selling short vs. Buying Long

It's important for you to know that short trading implies higher risk. When you take a negative position, you could lose more than you own. Let me clarify that statement by giving you an example.

When you want to buy a stock and go long, you can only buy as much as your capital allows. And if the trade goes down against you, making the worst-case scenario happen, the maximum amount that you can lose is 100% of your investment. To be clear, if you trade using a margin loan, a 100% loss could be more than the cash you have in the account. Nevertheless, if you buy 100 shares at $1/share and the price goes down to 0, you lose the entire $100.

But when you're selling short, you are borrowing the shares that you're trading from your broker. Let's say you started with 100 shares at $1/share, and the price went up dramatically, hitting the $5 mark. When you took your position, you borrowed the shares, investing $100. But once the stock price hit $5/share, your total investment became $500 since you still have to buy the shares that you've already sold at $1/share. This way, you have just lost $400 on your initial investment of $100.

This may sound unrealistic to you right now, but we've recently seen stocks go up 1400% and more within one day. As you can see, you can lose your money very quickly when short selling. To avoid that, you want to have your trading plan in place. More specifically, you need to have an exit strategy. If you don't know when to exit safely when a trade gets out of hand, you can effectively lose your account in a matter of minutes. At Cobra Trading, we want to make sure that you're prepared for all situations in advance. We want you to know what you're getting yourself into and feel confident when trading.

HTB and Borrows

Another thing that isn't discussed often enough in relation to short selling is borrows. When you're trading, some stocks are marked HTB - hard to borrow. What does that mean?

Before you enter the trade on the short side, you need to borrow shares from your broker. If the stock is HTB, you'll need to request those shares and you may have to agree to an upfront locate fee, typically a flat amount per share. Now, every broker is different. When you're trading with Cobra, you may be able to locate the shares directly through your platform and also have access to us using a one-on-one chat. We are often capable of giving you these borrowed shares at no additional cost. We do it because we strive to provide the highest level of customer service. And if we can't get you those shares without the upfront cost, we'll make sure to try and get them at the lowest price possible.

Bulls and Bears: Which One Are You?

So this is a brief introduction to short selling, otherwise jokingly named trading on the dark side. It's exactly the opposite of traditional trading when you buy low and sell high. Instead, you sell high and then buy low.

Alternatively, you might have heard people talk about bulls and bears. Bulls are long buyers and bears are short sellers. If you want to be called a bear and you're willing to go against the grain while betting against the 90% of other traders, selling short may be for you.

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Most people assume day trading is buying a stock at a low price and selling it at a high price. It may be that, roughly, 90% of traders buy long. This is just a more commonly known way to trade on the market. However, you can also make a profit by placing a bet against the stock.

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How To Develop A Trading Plan

You must have heard various traders talk about their trading plans, how they follow them, or how they prefer to be flexible despite having one. What does that mean, and do you need a trading plan? Let's break it down.

What is a trading plan?

One of your main goals as a day trader is to become consistently profitable. But how does one become consistent? That's where a trading plan comes in.

As you're learning the ins and outs of day trading, you're collecting a huge amount of data. You start recognizing patterns, and now you need a good action plan that will help you trade well and try to make a profit.

Let's say that you're getting into a trade at $1.10 and you're willing to lose $0.10. That means that as soon as the stock price hits $0.99, you should be out of the trade. If your profit target is a ratio of profit 2 to loss 1 ($0.20 profit vs $0.10 loss), it means that you shouldn't exit the trade until the stock price hits $1.30 (you win) or $0.99 (you lose).

The main benefit of having a plan is that you already know what to do before entering the trade. This way, you are more in control of the outcome.

A trading plan consists of three main parts:

The most important part of your plan is the exit strategy. Once you have your exit, then you have your entry. The closer you enter to your exit point, the bigger the range for your reward.

Taking our previous example, you've established that your exit is at $0.99. If you buy at $1.05 instead of $1.10, you now have more room for making a profit and less room for taking a loss.

Now, your profit target depends entirely on you. Some traders are more risk-averse, and some are willing to risk more. You may focus on 1:1, 2:1, 3:1 based on your strategy and risk tolerance. Keep in mind that no strategy will ever be 100% successful. With every plan, you'll lose some trades, but you'll win some too. And if your plan proves to be successful 70% of the time, and your reward-risk ratio is 2:1, the numbers will make sense, and you will post a profit in the long-term.

Can I go without a plan?

On the other hand, you could just wing it and follow your instinct. The benefit of being flexible is that you can exit the trade as soon as it unfolds the way you didn't expect it to. But then you have no way of telling if your tactic works or not. Of course, you'll know if you won or lost that particular trade, but you won't know if it could be a plan that works or doesn't work most of the time. When executed well, a plan can be successful only 50% of the time and still lead to profits. But without sufficient data to back it up, you may dismiss the tactic altogether and miss out on potential gains.

The fear of missing out (FOMO), is another huge topic in trading, and it's definitely worth talking about. We'll soon post a video about FOMO, and you'll learn how to overcome the anxiety that comes with it. To give you a sneak peek, having a solid trading plan in place is the first step.

Not knowing what to expect can really hurt people when they first start trading. It's especially true at the start. As a beginner, you may still not be sure how to trade. A trading plan can be incredibly helpful at this time. With it, you'll have a starting point and a system that will help you figure out your weaknesses and your strengths as a day trader.

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How To Develop A Trading Plan You must have heard various traders talk about their trading plans, how they follow them, or how they prefer to be flexible despite having one. What does that mean, and do you need a trading plan? Let's break it down. What is a trading plan?