In our last blog entry, we discussed Trading Journals and why you should be keeping one. In addition to the Trading Journal and Trade Plan, mentioned in previous articles, there are other things you need to determine as a part of your journey towards trading successfully. And important part of your plan is the trading strategy that you will use to achieve this plan. Whether you’re new to trading or not, a trading strategy is key to your consistent success. This can vary from person to person, but is defined by a set of rules set around Entry, Exit, Trade Selection, and Directional Bias. This trading strategy can vary depending on your own personal finances and risk tolerance. Let’s look at the five components that we use to create our own trading strategy. #1. Entry Points should be clearly defined and chosen based on levels of support & resistance. You can determine these by reviewing chart patterns or using an indicator to assist you. Choose your overall plan for the entry and exit points by making sure they line up with your income goals. #2. Exit Points are equally important. Keep an eye on market momentum and look for imbalances in supply & demand volume profiles. These can indicate areas before a market may change direction and indicate a good time to leave your trade. #3. Trade Management is one of the most important aspects of trading. The moment a trader can limit or remove risk from a trade, it puts them in a stress-free state. This involves putting either a stop-loss or a trailing-stop level into the trade before you enter it. This helps to remove the gambler’s mentality aspect of trading and helps to control emotional reactions. #4. Money Management should be based on your own personal finances and not anyone else’s ideas of what that should be. Decide how much you’re willing to lose in a day (maximum) before you start trading. Equally important is setting a profit goal for the day. Once you hit that number, you’re out! The markets are a risky place and it’s best to get out while you’re still ahead. #5. Psychology may be perhaps the hardest part of your strategy to control. You must prepare yourself for what the market will give you and accept that not every day can be a winning day. Part of striving for excellence has to do with building a positive mindset. We like to watch motivational videos on YouTube or read inspiring articles written by entrepreneurs to get us in the right frame of mind. Reviewing your live market trading videos can also help a good deal. View your trade sessions objectively and decide how you will make your next one even more successful.