Capital Management and Trading Plan - Crypto Academy/S4W8 - Homework post for @lenonmc21

in hive-108451 •  3 months ago  (edited)
Hello professor @lenonmc21. I have read your lecture about capital management and trading plan and now I am submitting my homework post given by you.

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1. Define and Explain in detail in your own words, what is a "Trading Plan"?


If we talk about trading plan then we simply see as the name suggests that trading plan is a strategy or a plan which is used by a trader so that he/she can get Profit at the time of trading. If the traders can have a good trading plan then they can get profit instead of loss.

By the good strategy of trading and by a good trading plan, a trader can remain persistent and consistent in his results and this makes the trader producing a better output and because of the good output, he/she will get a suitable strategy and he/she will be affected positively. When the trader makes a trading plan before going to trade, he/she can predict the market movement and can ensure whether the market is going to his/her plan or not.

If he sees that market is movingly according to his strategy, he place an order with a confidence of getting good profit in return. On the other hand, if he /she sees that market is not moving according to the strategy made bh him/her, they the trader do not place an order so that any unexpected loss can be avoided.

So, we can see that there is a persistency in the plans of a trader and by all this, we can say that a good trading plan has the goal that you want to achieve and a good strategy which can be used in the market. And by using this trading plan, we can get profit for sure but if we do not comply with the trading plan, we can end up by lossing all our money.

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2. Explain in your own words why it is essential in this profession to have a "Trading Plan


Trading is a that profession in which one requires a lot of experience to survive and get successful and where you have spend much time in observing the charts and identifying the patterns day by day and by making a good trading plan everyday, we can become an expert of our strategy and can make much more profit, as in the trading profession, the better you understand the chart, the more you will get successful in your plans and so by practice, we can improve more and obtain better results.

For getting success in trading, it is essential to have a trading plan because we all have a pen and paper in which we make our trading plan by which we get the strategy and movement prediction of market. But if we do not carry any trading plan at that time, we will not know whether market can go up or down and also, if we do not make any trading plan, we will be navigating the markets without any direction or strategy and in that case, there are much more chances of losing our capital.

Consistency is the main thing that a trading plan offers, as we will be complying with what is created on daily basis and gaining a lot of discipline which is important in the world of trading. The trading can provides you freedom financially and you can earn much from it but with a good amount of risk as the more you can earn, in same amount you can lose also. To get much earning from trading, you need to have a good mental strength and a lot of experience of the markets.

It is also known that a good trading plan usually helps to reduce or forget the rate of greed and fear of emotions at the time of taking trade decisions. Good trading plans can render a trader a profitable trading plans whenever any trader plans and predicts the market prices before taking entry to place, a buy or sell option which will favours them in turn.

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3. Explain and define in detail each of the fundamental elements of a "Trading Plan"


When we make our trading plan, we obviously need a fundamental element which we can include in our trading plan so that consistent results can get and if we face failure then we do not need to panic in order to minimize it. There are 4 fundamental elements of a trading plan which are given as follows:

1. Capital management:

The capital management is definitely one of the important thing which is related to risk closely. The capital management is calculated according to the total capital percentage of risk of loss and we increase the percentage of profit more than the loss percentage and so the occured loss will be covered automatically. Thus, the capital management aims to take the capital in account so that profit can be taken.

2. Risk Management:

The risk management is the basic thing which a trader must take into account when making a trading plan so that he/she can get away from loss. As the trading is so much risky and so it is necessary to have a risk management because there is no guarantee for 100% sure profit. The trader can also face loss and this can take all the capital. So by taking risk management, the amount of loss can be minimized and the small losses can be covered by profits.

3. Considering Physiology:

As we know that the trading is not only a physical exercise, but it involves our mental health also. Our mind must be fully concentrated at the time of trading and so our emotions are also important and must be involved in trading. The Decisions should be taken up from right mind and so the consideration of psychology is very important. Every decision must be taken from clear mind and we should not rush into the market without proper analysis.

Greed is a factor due to which many traders are grounded as many of the people buy the coin and hold it thinking that the price will go up and they will get more profit and so they do not set limits. And sometimes they face loss due to it when the graph reverse its direction from the expectation. We must follow the written plan to trade and as the morning time is best suitable for trading because at that time the mind is fresh and we can take good decisions.

4. Time Duration:

No only is trading, the time is important in every business. The time is always there but it is necessary for us to make our schedules according to the availability of time to catch-up. We can mot give our 24 hours to trading as there are many other family works and so it is necessary to have a time schedule like as I have mentioned that Morning time is best suitable for trading.

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Practice (Remember to use your own images and put your username). Build a "Trading Plan" and cover all the basics discussed in class. For this, you should NOT take the examples that I put in my class (Including the example amounts), use your own examples and your own images to make said plan, you must also base this "Trading Plan" as if you were operating on the platform of " Binance ”, taking into account that the minimum amount of exchange or investment is $ 10.


I am using the account of binance to do this task and I have done this task by assuming an initial amount of $10. The following chart is of the profit management of my strategy of 6 months.

Capital and Risk management:

  • I am supposing to invest $10.
  • The percentage of loss in the strategy is 1% and percentage of profit is 3%.
  • The maximum number of trades in a day I have done are 5 trades as it was suggested by professor @lenonmc21.
  • I stopped trading after 2 losses and after 5 wins.

Profit management:

MonthCapitalProfitLoss24 days profitTotal
1100.30.1616
2160.480.169.625.5
325.50.770.2515.4040.96
440.961.230.40924.5865.54
565.541.9660.65639.321104.857
6104.8573.1451.04962.914167.773

In the above shown chart of my strategy;

  • Month Depicts my strategy of trading of 6 months

  • Capital Shows the trading of the initial capital which I have used to start trading and the capital which I have obtained at the end of each month.

  • Profit indicates the 3% profit which i have obtained from daily trade.

  • Loss indicates the daily profit of which i obtained from daily trading.

  • 24 days profit shows the 3% profit which I got after 24 days of trading.

  • Total shows the final capital that i got after 24 days of trading including my initial taken capital.

My psychology:

I do not trade after listening a bad news as it affects the market negatively.

As, the professor told that moring time is good for trading, I also agree with him and I too trade in morning.

There should not be taken trade when the modd is depressed or when it is much exited. I go to trade only when I have a neutal mood and i control my emotions so that I have no confusions or doubts.

If I have a fear of risk in that trade, I don't do trade at that time.

The last psychology is that I do not ever borrow money from anyone for trading as it involves much risk and the borrowed money can also lost instead of giving profit.


CONCLUSION


The trading plan is a plan or strategy which is used by a trader to get profit from his/her trading. The trading plan is necessary for doing a successful trade. If the trader does not have a trading plan, then there are much chances of getting loss rather than getting profit. The trader must control his emotions at the time of trading and the mood of the trader much me in a good manner. The trading must not be done when there is any bad news.

The lecture of professor @lenonmc21 has proven knowledgeable and informative for me and I am thankful to professor for this lecture.

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