As a trader, you should always have a good trading plan. Trading is a business, so you have to treat it as such if you want to succeed. One of the worst bad habits a trader can have is trading impulsively and without any guidelines. Traders who take the time to make a trading plan are much more likely to succeed, but even with a plan in place they can develop bad habits. A trader will make impulsive trades even with their plan taped to the wall next to them. They may exit winning trades too quickly or let losses go longer than their plan states they should. Now, you must always keep in mind to never let your instinct overtake your plans.

A plan should be written in stone while you are trading, but subject to re-evaluation once the market has closed. It should change with market conditions and adjust as your skill level improves. Each trader should write his or her own plan, taking into account personal trading styles and goals. Using someone else's plan does not reflect your trading characteristics.

You can build a perfect plan by:

1. Assessing your skills and levels of preparedness

2. Assessing your emotional and psychological preparedness to start trading

3. Assessing your risk appetite

4. Setting your risk-reward ratio

5. Assessing the world markets before the home market opens. You could gauge the market mood for the day by having a look at the Index Futures.

6. Preparing for the day, by setting your support and resistance levels, clearing up the memory space of your computer for use of your trading software, etc.

7. Setting your exit rules. Before entering a trade, you should know the level at which you want to exit. This will help you limit your losses and maximize your gains.

8. Setting your entry rules. Set conditions for entry and follow them as and when they are met.

9. Maintain a record of all your trades. This will help you figure out your mistakes in trades while also getting to know the reasons for successful trades.

10. Perform a post-mortem of your trades at the end of each trading day and write your own conclusions, so that you can refer to them later, if need be.