If you decide to start your own business, you will most definitely need a business plan, correct?
This is the best way to organize not just your thoughts, but most importantly your actions to succeed.
With this in mind, it is advised that traders also have their trading plan.
This will make you, the trader, view your trades as a business and test your different strategies over time.
But what elements do you need to prepare your trading plan?
Let’s prepare a simple one to start practising.

First, we need an “Entry” into the market.
The entry may be Buy or Sell.
As we mentioned in previous videos, we buy in an uptrend and sell into a downtrend.
Because of Newton’s First Law of Motion!
An uptrend is more likely to continue to move in the same direction than reverse.
Similarly, a downtrend is more likely to continue to decline lower and lower than reverse.
Now, what happens in the unfortunate event that the market reverses before we book any profits?
Simple. We lose money.
How much? Nobody knows. A little, a lot, or everything.
This does not sound very good now, does it?
Well, this is why you should always place a protective stop loss to avoid big losses.

Last but not least, we need to define the “take profit levels”.
An easy way to go about is a 1:2 ratio.
So, first things first.
What timeframe are we going to use?
The answer is simple.
Your preferred timeframe!
Next, how are we going to identify the trend?
With the help of the 100-period moving average!

The Buy entry will be determined by the 50-period moving average.
More precisely, we look for a downtrend as defined by at least two lower tops and two lower bottoms.
A tip here is that the prices will below both moving averages and additionally both moving averages will be moving in parallel without crossing each other.
Now, we look for price to break through above the moving average.
Then, wait for the correction to the 50-period moving average.
The moving averages have just crossed!
This is a good opportunity to buy when the price exceeds the current top above the moving average.
Remember! Stop-loss is at the last bottom!
And of course, taking profit is up to you.

So your 2 choices in this case are:

  • Either close the trade when 1:2 or 1:3 risk to reward ratio or
  • Close the trade when the closes below the 50-period moving average.

Now you have a strategy!
Happy trading!