A Lot of people who start trading never create a trading plan. It’s why they often lose money.
Trading without a plan is the fastest way to get frustrated.
A trading plan helps you to maintain discipline and patience which are the key requirements to be successful in trading.
In this article, you will learn how to create a crypto trading plan and the key details the plan requires to be successful.
A trading plan is essential for success in the volatile crypto market.
How To Create A Crypto Trading Plan
1. Define Your Goals and Risk Tolerance
The first thing to do before you start trading is to ask yourself why you want to start trading and do you have sufficient information to begin.
Other questions you need to ask are:
Are you looking for short-term gains or long-term investments?
What is your trading capital, and are you aware you can lose it all?
How much risk can you tolerate?
Do you have emotional discipline?
The questions above are the foundations of successful crypto trading. If you ignore them, you might lose all your money very fast.
2. Choose Your Trading Style
One of my mistakes when I started trading was that I didn’t have a trading style. Today, I was a day trader, then the next day, I was a swing trader.
If your trading style is not consistent, so will your results.
Based on your goals, decide on one of the following trading styles:
Day trading: Opening and closing positions within a single day
Swing trading: Holding positions for days or weeks
Position trading: Long-term holding for months or years
Scalping: Making numerous trades to profit from small price changes within a short time
Each of these trading styles requires different strategies, and if you use the same strategy for all of them, you will fail.
3. Select Your Cryptocurrencies
You would have to research and develop criteria for the cryptocurrencies you want to trade.
Everyone has different criteria for their selection.
For me, I select based on upcoming news and the crypto has to be in accumulation with good Tokenomics.
You can consider factors like:
Market capitalization
circulating supply
Trading volume
Upcoming news
Historical price action
Project fundamentals and team
Regulatory environment
It’s often wise to start with more established cryptocurrencies before exploring lesser-known altcoins.
4. Create Your Analysis Method
You must create your unique analysis method to avoid confusion in your trading.
You can use any of the following analysis methods:
Technical Analysis: Study price charts and use indicators
Fundamental Analysis: Evaluate the underlying value and potential of projects
Sentiment Analysis: Gauge market emotions and trends
Most successful traders use a combination of these methods
Whatever method of analysis you choose, make sure you keep it simple. A complicated method is most times not profitable.
5. Set Entry and Exit Rules
It’s the most important part of a crypto trading plan, and it’s where most traders mess up because their emotions take over.
If you can’t follow your entry and exit rules, you will never be successful as a crypto trader, no matter how good you are with technical analysis.
Establish clear rules you must not break for each of the following:
When to enter a trade (the conditions that must be fulfilled before you enter)
When to take profits (set your profit targets before you enter a trade)
When to cut your losses (set your stop loss immediately after you enter a trade)
For me, my stop loss is always 2% of the trade amount (I know I’m quite stingy with my funds)
Having predefined rules helps remove emotion from your trading decisions.
6. Determine Position Sizing and Risk Management
Before you enter a trade you have to determine your position size and how much you’re willing to risk on that trade.
For example, if you have a $1000 trading account, you can divide it into 4 parts of $250 for each trade and then be willing to risk 2% (of $250), which is $5.
It means your maximum risk per trade is $5.
You can also set profit targets to ensure you don’t give back your profits to the market.
7. Choose Your Trading Platform
You have to choose a crypto exchange that offers the following:
The cryptocurrencies you want to trade
Adequate liquidity
Strong security measures
User-friendly interface
Reasonable trading fees
The following exchanges fit the narrative above: Binance, kucoin and bybit.
8. Keep a Trading Journal
For years, I didn’t think I needed a trading journal until 2021 when I had a strong feeling to start documenting my trades. It was the best decision I ever made.
Having a journal would show you a lot of the things you’re doing wrong, the mistakes you keep repeating and the areas where you need improvement.
I have been using a journal for about 3 years, and my mistakes have become very obvious to me, which makes it easy to fix.
Maintain detailed records of your trades, including:
Entry and exit points
Reasons for entering/exiting
Market conditions
Emotional state
The outcome of the trade
It will help you refine your strategy over time.
9. Focus On Continuous Learning
The crypto market evolves rapidly; what works today might not work tomorrow.
That’s why you have to keep learning.
The more you learn, the greater your chances of success.
Ensure you stay informed about the following:
New technologies and projects
Regulatory changes
Market trends
Trading strategies and tools
Frequently Asked Questions
What Is A Crypto Trading Plan, And Why Do I Need One?
A crypto trading plan is a structured approach to trading that outlines your strategy, goals, risk management, and decision-making process.
It helps you stay disciplined, reduces emotional trading, and increases your chances of long-term success in the volatile crypto market.
What Are The Key Components Of A Successful Crypto Trading Plan?
A successful crypto trading plan typically includes the following components:
Trading Goals: Clear, achievable objectives.
Risk Management: Guidelines for managing risk, including stop-loss and position sizing.
Market Analysis: A strategy for analyzing the market, such as technical or fundamental analysis.
Entry and Exit Strategies: Criteria for entering and exiting trades.
Record Keeping: A system for tracking trades and reviewing performance.
How Do I Set Realistic Trading Goals?
To set realistic trading goals, assess your financial situation, trading experience, and the amount of time you can dedicate to trading.
Start with small, achievable objectives that you can build on over time, such as a percentage return on investment or a specific number of successful trades per week.
