An effective Trade Plan is one which incorporates the 3M's: Method, Money and Mind.
This is the holy trinity of trading, and it's important that traders understand these factors before they can really achieve consistent success. Typically, the newbie trader is only interested in the 'Method'. All they want to know is which indicator to use and tend to get carried away with the fancier options. In some cases, they are looking for trading signals with someone telling them when to buy and when to sell. It is only a seasoned and professional trader who understands that ‘Money’ and ‘Mind’ are more important and that 'Method' really accounts for only a small part.
The bottom line is that once the 3M's are taken into consideration, it automatically puts the trader into the top 10% of the winners.
If we had to rate the 3M's based on percentage, the break-up would be as given below...
Risk Management = 50%
Design a proper money management plan, which would be built around the technical strategy selected.
This would consider the Risk management factors:
The correct amount of risk to be put on each trade
Getting the proper Risk-to-Reward ratio for a trade
Taking care of unexpected draw downs
Managing the trades to achieve higher returns
Increasing the equity curve of the account by designing the correct Win Probability and Win/Loss ratio
Psychology of Trading, which is Patience + Discipline = 30%
Prepare a precise ‘Trade Plan’ in a straightforward 'black and white' way with no shades of grey
Don't get influenced by where the market is going
Have the patience to wait for the correct technical setup to form
Have the discipline to follow the trade plan, regardless of the outcome
Trading Techniques = 20%
Select the correct technical strategy from our vast techniques available
The basics of all our techniques are the tools of ‘Fibonacci ratios’ and ‘The 1-2-3 chart pattern’, and a decisive ‘Magic tool’