Some things to consider when doing a Trading Plan.
Your Trading Plan basics will vary slightly depending on whatever style of trading you wish to do.
If you wish to become an Option trader you will have different trigger points to what you would have if you were a long term investor.
As an Option Trader you are more likely to be affected with Company announcements and data releases by Companies.
You will be more inclined to study short term movement and take notice of things like when dividends are paid.
If you are a long term investor more a Buy and Hold type Trader then you will be more interested in dividend yield and the long term trends of the stock when formulating your Trading Plan.
If you can establish the type of Trader you wish to become prior to doing a Trading Plan that will help you chose and determine what criteria you should use for your entry and exit strategies and also help you with the decision of how much of your capital you are going to invest in the trade.
What criteria will trigger an entry into a trade? and
What criteria will trigger an exit from a trade?
These two triggers are very much interconnected. If your entry signal changes it may well become your exit signal.
Exit signals are not only created by a changed direction of a stock. You may be happy with a certain profit level and when reached that will become your exit trigger.
It is valid to remember that whatever it is that triggers your entry and exit strategies there is someone else that thinks the opposite is going to happen and that will trigger a complete different set of exit and entry levels for them.
Decide in your plan how much of your capital you are going to allocate to each trade you enter. This will help especially when all indicators look great, you will not be as tempted to increase your investment because you have a nice “feeling” about it.
Refine your Plan until it is second nature to you and is the fundamental basis of your trading.
Go over old trades especially the ones that go wrong, learn from your mistakes as much as you delight in your wins. Print out your trades so you have a visual reminder of what you do right and what you may have done wrong.
Always be prepared to refine your plan to keep it as simple as you can, test sections of it to make sure it works how you want it to and alter it if you find a better way for you to trade successfully.