A Trading Plan Increases Your Success As a Share Trader

A properly constructed trading plan is your road map to trading success. It is absolutely essential to have a written, well-defined trading plan before you begin trading in the share market.

Without a plan, you will be likely to make mistakes and get distracted by just anything that comes along. To increase your chances of success, you need to develop a good trading plan, stick to it and set goals.

When writing a trading plan, you need to include the following components:
- Decide what your objectives are: This allows you to build a portfolio that reflects your goals.
- Set your risk level: This depends on your trading style and risk tolerance. You need to decide on how much risk you are willing to take, and how much of it can you tolerate.
- Set risk/reward ratios: This is a critical component to successful trading. Risk reward ratio compares the potential risk with the potential reward in a trade.
- Set goals: Before entering a trade, you need to establish a realistic goal or profit target.
- Set entry and exit rules.
- Amount of investment: You need to decide on how much money you are going to invest in various stocks. One advice is 'Never put all your eggs in one basket'.
- Create a balanced portfolio of investments.

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