A FOREX TRADING PLAN
One of the key thing that’s common among all traders is the fact that they all have a trading plan. I’m an active member of different Forex Trading Forums, and I’ve seen many traders never even make a trading plan, not to talk of using one.
Why is Trading Plan Important?
In trading generally, whether Forex or Stock, having a trading plan is vital because it’s the plan that you as a trader uses to determine your trades, manage them and take profits systematically.
Becoming and remaining an organized and disciplined Forex trader, you need to establish a Forex trading plan. Having a plan and following it will guarantee your consistency in trading. The fact that there are no rules in trading Forex makes it different from all other jobs in the world. These leads to careless, emotional trading by most traders. Having set of rules you follow in Forex trading is important to a trader because, without these rules, you are just another gambler. This process of establishing a Forex trading plan around an effective trading strategy e.g. Price Action Trading will help in solidifying your understanding of the trading strategy and provides you with a blueprint for your requirement in the market each time you enter.
What Makes up Your Trading Plan
- How you trade and the management process of those trades.
You want your trading plan to contain a written description of what your action will be in the markets. You want to include things like your trading edge, how you trade it, when and what time frames you trade. Risk management and profit taking strategy should also be in your trading plan as well as your overall goals as a Forex trader. When you have these and follow them long enough, it will become part of you consciously or unconsciously to that point where you just know what you are looking for in the market; which helps in building your confidence as a trader.
- A Routine and Checklist
Without a routine in your trading activities, you will end up confused. My trading philosophy is built around trading Forex only on the daily and weekly chart. To trade successfully like a professional, you need to have a routine you follow, and you need to be disciplined.
Things you look for in the market and what you intend to see before entering a trade should all make up your checklist. In fact, your whole trading plan can be formulated as a checklist; it will be a good format that enhances your decision on taking a potential trade setup.
- The most important virtue of having as a Forex trader is Patience. As a patient trader, you know what you are looking for in the markets, and you only execute a trade when your trading edge appears. Adopting this process will help in eliminating many losing trades and improves your trading. The importance of patience should be stressed in your trading plan as it helps in bringing to your remembrance always why being a patient trader is critical in making money in the market.