How to Create a Trading Plan
If you want to succeed in Forex you need to have a trading plan. The trading plan it is trader’s guide to identify and execute trades, including what conditions they will buy and sell securities.
Below you will find some important factors that your trading plan should contain.
Rate your skills
First you need to test your strategy. Are you confident that this strategy will work? Can you follow your strategy without biases and hesitation? If you haven’t mastered your trading strategy yet, then you will need to practice it until you are comfortable enough to implement it.
Trading can be very emotional and stressful. Therefore, if you are facing personal challenges or trading challenges it is better to take it easy and do not place trades. It is important to open a position only when you are emotionally and psychologically ready.
Set Your Risk Level
When trading you should set a risk level that you are comfortable with. Even experienced traders they do not risk more than 6% of their capital What you choose should be dependent on your trading style and risk tolerance.
Set Your Goals
Before you start trading, you should set yourself your targets. Are the profit targets and risk/reward rations realistic? As a trader you are expected to set weekly, monthly and yearly profit goal and review them as often as possible to check yourself if you are on track.
Be Prepared Before Trading
It is suggested to research the major financial news of the day before you start trading. Set up support and resistance zones on your charts and of course come back to your trading plan.
Entry and Exit Rules
Before entering a trade you should know where your stop loss and profit targets are going to be placed. When you a enter a trade, you should know where your stop loss and profit targets are set. Your trading plan will tell you when and where you enter the trade, what the indicator needs to do and what the price action needs to do, what happens a different time frames to enter the trade.
Record your overall trading performance to analyse how effective your trading strategy is and where you are going wrong when you are experiencing losses.
If you want to become a successful trader then it is crucial to have a trading plan that you will always come back and check. If you trade without a plan is like you are looking for a treasure without a map. This will end up in making the same mistakes over and over again.