How To Make Effective Trading Plans In Share Market?

The stock market or the bourses are great place for those seeking to earn real value for their money. If the country and the economy are growing and you want a stake in it – this is the place.

The way to success is often designed with a simple yet effectual trading plan. This is not going to be very easy, but is a must and once you have it, life becomes much less complex. An efficient plan to trade on the bourses can be stitched together based on various parameters such as:

  • Style:

The idea at the outset must be to realise the type of trading which one wishes to pursue. One must not be ambiguous and go with a buy and sell idea. Success here means precision and being decisive.

  • Plan:

A written plan is a must which must be followed religiously. An estimate of the reversals and pauses of the market should be made and then a fixed plan should be stitched together. The plan should however be flexible to re-evaluations post market closure.

  • Essential elements:

One must test the plan through simulation trading or paper trading. One must be ready at all times to act and hence assessment of skills as to overall preparedness is essential. One must set the goals for risk and return at the outset. The stop loss and consequently the profit margins when you liquidate must be set early. It is as much a mind game as any; hence mental preparation is also just as important.

  • Time Frame:

One must set horizons on the investments. If the horizon is very short term, then less active traders find that too much is required to be devoted to the process. The opposite is true for fast paced traders. It is thus advisable to find one’s own pace to begin slow and then gradually find one’s place.

  • Selection:

One should perform a good deal of research to select the best stocks. Position sizing in a balanced manner should provide the optimum number of shares to purchase as well.

  • Entry – Exit strategy:

One should use reports which are specifically available directing the entry points for each scrip. It is advisable to go for professional advice here. There are various methods to determining the exit strategy which depends on resistance levels or support level breaches or merely a price point.

Of course one also has to bear the risk which comes along with, however the same like any risk which we face can be mitigated.

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