Tuto: How to establish your trading plan? (Part 2)

You can find the first 3 phases of our tutorial on the trading plan by reading the article “Tuto: How to establish your trading plan? (Part 1)

Phase 4: Choosing a good broker

The 4th phase of this tutorial consists in enlightening you on the choice of an online broker*. There are many online brokers. All will sell you their services as the best in their field. Don’t be fooled. Each broker has very different terms and conditions from another. Take the time to read them carefully before you sign up and open a trading account. MassLib offers you a list of brokers recognized in Forex and CFDs but also as a binary option who are authorized to practice in Europe.

choose your broker

The best thing to do is to open an Excel workbook and list all the brokers you are interested in, noting their advantages and disadvantages. This will give you an idea of the brokers who best suit you. You can already get a good overview of the offers by reading our tests.

Each broker has different transaction fees. It will therefore be wise to choose a broker based on his low transaction costs (especially if you DayTrade) but also on the availability of his customer service and his speed in placing your orders on the markets.

Your broker’s transaction costs can quickly impact your trading margin.

*To be noted: When you make a decision to buy or sell a financial instrument, your order is placed through a broker who acts as an intermediary between you and the financial markets. A broker is essential for any individual trader wishing to engage in trading.

Phase 5: Implement a risk management strategy

risk managementTaking a position on the markets is a matter of reflection and not a matter of sniffing around. This ensures that you perform your analyses correctly before taking a position. Once you have taken your position, you will need to put in place parameters that will allow you to protect your capital in the event of an unexpected change in the price of a share.

Set up “Stop-Loss”. A Stop-Loss closes your position if the price of the stock in which you have invested is too low. As a general rule, the ratio is 10% loss for 30% gain.

Let’s take an example to illustrate this:

Let’s suppose that we buy a share whose price is 10€. In order to limit our risks, we place a Stop-Loss at 9€ (10€ – 10% of 10€). So if the share price reaches 9€, our position is closed and we do not take the risk of losing more if the price drops afterwards. In the case where the share price is the increase, we can set a target of 13€ (10€ 30% of 10€). Once this €13 is reached, it is quite possible to place another Stop-Loss from €13 and thus blocks your winnings while continuing to make a profit if the action is on the rise.
This phase is essential if you want to generate long-term gains.

Step 6: Often question yourself and write down all your comments

It is important in trading to keep track of all your positions and note your comments in order to analyze what worked and analyze your mistakes to become a better trader. It is important to have a track record of your performance to improve in future trades.

trading preparation

Also, focus on patterns (graphic trends) that are clearly recognizable. Your objective is to generate profit. Never invest in a financial instrument of which you are not 100% sure of its evolution because it could greatly affect your capital but also your nerves.

If you have suffered heavy losses (which is not supposed to be the case since you will have pre-set your Stop-Loss…), do not panic. Stop trading for one or two weeks while you cash in your defeat(s) and come back calmly ready to go back up the slope. Feel free to review your trading strategies often. Markets are constantly evolving. Adapt to them.

  • Start CFDs with IG, a reliable broker present in Paris and a reference in the world of trading.