The Birb Nest
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The Birb Nest

NEST — 4 Essential Steps for Creating a Profitable Trading Plan

This guide is sponsored by Prime XBT, the leading Bitcoin-based margin trading platform. All links to Prime XBT in this guide are referral links.

“Good fortune is what happens when opportunity meets with planning.”

— Thomas Edison

Many beginning traders enter and exit trades on a whim. They feel great euphoria if a trade goes their way, and sudden dread or panic if a trade goes against them. They win a few trades, but then eventually lose it all in a string of poor trades.

Wouldn’t it be nice to change all that? How would you feel if you could trade with little stress, always knowing what to do, constantly and systematically improving your trading so that you are able to consistently squeeze profits from the markets?

If you answered yes to the questions above, then you need to start trading with a plan.

In this article, we will go over four essential elements of creating a NEST trading plan to help you become a more consistently profitable trader.

Step 1: Needs and Wants

Before you start trading, you should understand what you need or want from the market. This will help you determine what you should trade and how you should trade it.

Every person is different. A strategy that works well for one person may be unusable for another.

Are you a beginning trader? Then perhaps you may wish to start with a simpler strategy with indicators that provide clear signals to help you manage your trades, keeping only one or two open trades at a time.

If you are a professional trader, then you may want a more flexible strategy that allows you to use your experience to evaluate trades, and have several open trades at once.

Those who have a lot of time to be in front of the screen may want to go for a scalping strategy on a 5 or 15 minute timeframe that makes the best use of their ability to actively manage trades.

If you are busy and have limited time, you may want to go for higher timeframe trades on the 4 hour, daily, or weekly charts. You may even choose to delegate some of your trades to other professional traders using a service like PrimeXBT’s Covesting module.

Step 2: Entries and Exits

Now that you know what you want from the market, you should be able to create or choose a trading strategy that suits your needs.

No matter if your chosen trading strategy relies on price action, moving averages, MACD, RSI, or other indicators, it must contain some rules for helping you determine when to enter and exit your trades.

Under what market conditions will you start looking for long or short trades?

What specific candle pattern, indicator behavior, or other signal will be your trigger to enter a trade?

Once you are in a trade, how and where will you take profit? Will you use set take profit targets, trailing stop losses, or a combination of both?

How will you know if your trade idea is invalidated, and where will you cut your losses if that happens?

Being able to set rules to help you answer all these questions at any time before or during a trade will help you stay calm no matter what happens during a trade.

When choosing or creating your trading strategy, make sure to do some backtesting before trying to put it into use. To backtest, simply take your strategy and apply it to the historical chart of your chosen asset. Note down how much profit you would have made if you had used your trading strategy to take trades for the past few days, weeks, or months.

After deciding on or creating a trading strategy to execute, do some backtesting to check if it would have performed well on your chosen assets in the past. Using the entry and exit rules you have set, go into the historical charts and note down how many winning trades and how much profit you would have made if you had used the strategy for the past few weeks and months. If the strategy still looks promising after backtesting, then it is ready for you to start implementing and testing with some real trades.

Step 3: Safety Rules

Many people think that trading is only about the entries and exits.

Although having a profitable system is an important part of trading, even the best trading systems have periods of drawdown where many trades can fail in a row. Without the proper precautions, a few failed trades could wipe out your portfolio and erase all the gains you have made.

That’s why it is important to set trading rules for yourself and practice proper risk management to help you stay in the game even if your chosen trading system hits a rough patch.

The best trading safety rules should be tailored to suit each trader’s particular situation, but some useful examples of such rules could be:

  • Stop losses are mandatory
  • Risk 2% or less of your available capital per trade
  • Trade with the trend
  • Take a break if you have too many losses in a row
  • Take a break if you have too many wins a row
  • No open positions overnight
  • No more than 2–3 open positions at a time

While putting plans in place for when you lose trades may not sound very exciting, it is crucial for your long term survival as a trader.

Step 4: Trade Review

Your trading plan is not set in stone. Over time, your plan should evolve and improve as you learn more about your trading system, trading habits, and your chosen market.

To help you spot areas in your trading that need improvement, it is crucial to keep a good trading journal.

Using your journal, you could for example discover that your trading system works well during uptrends but performs poorly during downtrends. You could also realize that one system works well for stocks but does not do as well when trading cryptocurrencies.

Aside from the entries and exits you take, including details such as the time of the trade, your mood, or even what you had for breakfast, could all help you spot helpful or harmful factors that have an impact on your trades.

Schedule time every week or month to go through your trading journal to find good habits that should be reinforced as well as weaknesses that need to be addressed.

If needed, come up with some potential tweaks to your trading system, backtest them, then test them in a real trading environment.

Doing this regularly will really help you grow as a trader.


The NEST trading plan consists of four essential elements:

Step 1: Needs and Wants
Step 2: Entries and Exits
Step 3: Safety Rules
Step 4: Trade Review

Implementing the NEST framework for creating a trading plan will give you a system for trading that improves and grows along with you on your trading journey.

Planning your strategy ahead of time will also significantly reduce your stress levels and trading errors, as you’ll always know what you need to do next.

While working with a trading plan may initially seem like a lot of work, it is a critical tool for any serious trader who hopes to stay disciplined and profitable over the long term.

Whether you’re planning on trading forex, cryptocurrencies, stock indices, or commodities, PrimeXBT lets you trade it all from one easy Bitcoin-based account.

To get started, sign up at



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