Related Links

Forex Trading Plan – an Overview

This article will explain exactly why you need a Forex trading plan, and also provide you with a few ideas to formulate your trading plan and then get onto the forex markets. You will need a forex trading plan whether you intend to be a long term trader or a short term trader. As a day trader you would be successful only by consistently implementing your trading plan. You could do so by conducting regular analysis of each of your trading sessions, say for example at the close of each candlestick pattern, or on a price alert when the price reaches a predetermined level. What do you do then? You simply have to follow the parameters of your trading plan by then taking suitable steps to enter, manage or exit your trades.

Firstly what is a forex trading plan?

Imagine for a moment that you were an American citizen and you were planning to visit Europe for your holidays. Obviously you wouldn’t just buy an air ticket and board a plane to just about any European country. You would first do a background check of the best country to visit at that time of the year, the places of interest to you, the hotels you would most likely stay, the food, the customs, etiquettes and so on. After all you are planning to go to an entirely new place. You obviously don’t know what you are likely to face, you don’t know the language and the culture and so on. A forex trading plan is no different, and if at all there is any difference it is the fact that a forex trading plan has greater importance as it constitutes your roadmap in making forex profits, and involves a financial commitment from your side in achieving that. So a forex trading plan is just like any other plan. You got to follow it to perfection if you want to be on the road to profits.

Now how do you create your forex trading plan?

First write down your goals and objectives that you want to see happen in your trading business. Keep your trading plan as simple as possible. It should have enough details and a set of strict rules like for example include the golden rule “never invest more than 5% of your capital on any one particular trade”. Always question your trading activity, and look to your forex plan for guidance. If you are off track use your forex plan to get back on track. A forex trading plan should guide you at all times in your trading activity. If you ever want to achieve consistency in your trading pattern, having a forex trading plan is a must. In fact your own individual personalized forex trading plan would be the cornerstone of your entire trading activity.

When you have a forex trading plan, you have automatically programmed yourself to embark on a path of continuous growth and expansion in your trading business. By sticking to your plan, you would hopefully trade larger lots and make better profits over a period of time.

Perhaps at some point in your trading life you are likely to run into the adage “Plan your trade and trade your plan”. However this is easier said than done. But if you follow this advice, you would in effect be following very safe trading guidelines. The guidelines in your forex trading plan could very well be set up to watch out for both exit and entry rules in entering and exiting a trade, and the common pitfalls you got to avoid at every step.

But your trading plan must have some key points. Here are a few of those points.

Your system

Would you want to be a day trader or a swing trader? What indicators would you like to watch and which are the charts you would like to dabble with. What is the capital you are willing to risk per trade and a clear idea about your entry and exit points?

Your goals

What is the annual income you are aiming at in forex trading? And how much would you try to achieve in the first, second and third month and so on. Finally how many losses could you sustain, and at what point would you prefer to curtail your trading activity. Having your goals set out clearly is very important.

Major Weaknesses

Set forth your money management rules with specific emphasis on whether you have the tendency to overtrade or overreact with anger. Ideally find a sample trading plan on the internet and use it as a template to create your own customized forex trading plan. Having created it, read it, revise it whenever necessary and simply stick to it.

Remember that a forex trading plan is your own personalized checklist or flowchart that quite simply details the actions you need to take, so that you could control your overall forex trading activity.

Related Posts

RSS feed | Trackback URI

Comments»

No comments yet.

Please Rate (You can rate only if you leave a comment)
1 star2 stars3 stars4 stars5 stars (2 votes, average: 5.00 out of 5)
Loading ... Loading ...
Name (required)
E-mail (required - never shown publicly)
URI
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.