This part of the trading plan tells you how to go about the business of trading. And it is a business. If you don't approach trading like a business, you are almost guaranteed to lose money. You need to develop a system that you can follow day in and day out if you want to be a profitable trader.
Your strategies tell you what to trade and when to enter and exit trades. Notice it is strategies and not strategy. The reason for this is that you need to develop multiple strategies because the markets go through multiple phases and a strategy that works in a trending market will not generally work in an oscillating market and vice versa. Also strategies go in and out of favor. A strategy will work beautifully for a period of time and then for reasons unknown just stop working. As a result, you need to constantly be developing strategies that you can switch to when your current strategy stops working. You need to adapt to the ever changing market.
The key components of a Trading Strategy are:
Instruments to trade - Stocks, Bonds, Options, Futures or Forex.
Strategy type - Momentum, Gap, Breakout, Reversal, Splits, Earnings, News, etc.
Determine your edge
The key components of a Trading System are: