If you are a beginner who has just entered the world of trading cryptocurrency, then making a good trading plan is one of the skills you need to have. Most beginners who jump into the world of trading without preparation usually end up losing money, especially those who don’t do market analysis and make intuitive decisions. However, in order to become a professional trader and make a profit, you must be able to create a trading plan that is structured and analysis-based.
What is a trading plan?
A trading plan is a systematic guide to comprehend the rules of the game, market analysis methods, risk management, and trading timing. Its functions as a tool for traders to stay focused on planning and structured strategies that have been made previously. This is very necessary, considering the volatility of the cryptocurrency trading market.
To avoid psychological obstacles that often lead traders to make wrong decisions and ensure consistent results,it’s good to make a detailed trading plan about different scenarios that may occur, what the risks are, and what are the right steps to take in each scenario of market changes.
5 Steps to Create a Trading Plan
If you are a beginner, it’s common to be confused about where to start when constructing a good trading plan. To make it easier, here are 5 steps you can follow:
- Choose Your Favorite Analysis Method
Each trader has their own favorite combination of methods. If you are a beginner, it’s okay to try all kinds of methods during practice on a demo account, to find out which is your best set combination. On TokenomyX, you can practice cryptocurrency trading with a demo account that provides free and unlimited virtual funds. There are many methods that you can use to analyze market price movements, such as support resistance lines, trendlines, candlesticks, Fibonacci levels, Elliot Wave theory, Fundamental analysis, and so on. With a lot of practice and learning more about the various methods available, you will eventually find your own market movement analysis style.
- Determine your Risk Level and Profit Goal
The Loss and Profit Plan is your guide to determining Limits when placing trading positions, so that you don’t lose more than you are prepared to. It is important for a trader to realize that although it can provide high returns, trading cryptocurrencies also carries a high risk. So a trader must be wise in determining how much they are willing to lose, as compensation for the targeted profit. It is good risk management that makes a trader more strategic in the decisions they will take.
- Define Entry and Exit Position Rules and Trading Time Period
From there, determine the size of the trade that you should place based on the results of the analysis, then set the Long or Short position that should be taken. Don’t forget to specify the right trading time, when to enter, and when to exit the trade. With more experience, you will better understand the best ways or techniques of applying entry methods in various market conditions.
- Create a Trading Evaluation Journal
Evaluating every transaction made will make it easier for you to learn from experience and mistakes. We recommend that for every position that you have taken, gains or loses, it is entered into an evaluation journal to assess the quality of the strategy and trading plan. It can also let you know about what steps or mistakes to avoid and correct in the future.
- Prepare Yourself Mentally and Psychologically
In addition to preparing skills and good financial management, you also have to be mentally prepared. You should know how to hold your emotions when there is a big loss, and refrain from being greedy when you gain profit. Learn about how to prepare good trading psychology so that you are not surprised to face the various negative emotions that come with entering this industry. Also, make sure you take care of your body and mind so that you can make decisions in a healthy state. For tips on controlling emotions when trading, click here.
Are you getting excited about cryptocurrency trading? For starters, make sure you choose a secure cryptocurrency platform like TokenomyX. If you are a beginner who is still afraid to start, you can practice using the demo account provided on TokenomyX. It’s easy, you just need to register and verify your identity. Then you just have to start the demo with virtual funds — it’s free, and you can top up unlimited times!