How To Make Your Forex Trading Plan
Producing a Forex trading plan is one of the key elements of becoming a successful Forex trader.
Many traders never make a trading plan, let alone use any regularly. It’s imperative that you do both; make a trading plan and use the one you make effectively…don’t just make one and then never look at it like many forex traders do.
Here are some solid points to consider regarding Fx trading plans:
• Follow a plan, have a journal and log trades.
You need to do three necessary things to become and remain a prepared and disciplined Forex trader. These things are as follow;
1) Devise a Forex trading plan,
2) Form (or use an existing) Forex trading journal,
3) Use BOTH of them.
The means of creating a Forex trading plan around an efficient trading plan like price action trading will work to thicken your understanding of the trading plan and will also furnish you with a blueprint for what you require doing every time you interact with the market.
Having the market blueprint is crucial for developing the type of ice-cold discipline that it takes to profit in the Forex currency market over a long-term.
Logging your trades in a trading journal is significant to your success because it enables you to have a visible representation of your ability (or lack thereof) to trade the forex markets, it also builds a track record for you that you can use which and will show you how your trading edge works out over the period, this will allow you to ‘tweak’ and modify your trading strategy as you deem fit.
• Trading plans contain a routine and checklist
To put it in a simple term, you NEED to have a system in your trading activities; otherwise, you will just finish up running and gunning the seat of your pants.
I have a trading belief that revolves around trading Forex like a sniper and not like a machine gunner if you really want to trade like a sniper you have to have a system that you follow, and you have to be very disciplined…
A sniper in the military is an extremely disciplined individual, and you must think of the Forex market as if it’s a war, and you are the sniper trying to take only the ‘easiest victim’; your ‘prey’ in the markets consists of only the greatest trade setups.
Your trading method should include a checklist that you follow; this will involve things that you look for in the forex market and what you aspire to see before entering a trade.
If you can tap all the boxes then you enter the trade, else, hold off until your trading edge appears again.
You can formulate your whole trading plan as a checklist; this will make it a smooth format that allows you to decide quickly if any potential trade setup is worth taking.
• Trading plans contain written guidelines of what a trader will do and look for as well as images of trade setups.Your trading plan should include a written explanation of what you will do in the markets.
This includes items like what your trading edge is, how you trade it when you trade it, the time frames you trade, your policy for risk management and profit making, and your overall goals as a trader.
You should also include images of your trading edge setups so that you are always reminded of what an “ideal” setup looks like.
Ultimately, after you follow your written guidelines and “typical” trade setup pictures long enough, you will burn them into your memory to the point of knowing exactly what you are looking for in the forex market, which will work to build your self-confidence as a trader.
• The trades planned in advance and ‘anticipated’ works best.
One of the chief reasons to create a Forex trading strategy is because pre-planning your trades and pre-determining what you are searching for in the markets is the best way to make a profit over the long-run.
You will never be more real and calm then when you are NOT in the market, therefore, if you can plan out all your trades when you are not in the market, you will be wholly uninfluenced by market variables when you are in a trade, and this will work to shield you from becoming an emotional Fx trader.
• Be patient and wait for the situation of a plan to unfold – don’t force the issue
Patience is possibly the most important quality that a Forex trader can possess. When you are a patient trader, it suggests you know what you are looking for in the forex market, and you wait for your trading edge to show up before you carry out a trade.
Trading in this manner eliminates many harmful trades that are the result of emotionally trading…or without patience.
An enormous part of trading, and perhaps the largest part, is simply waiting for an “ideal” price action setup or another trade setup to form in the market.
Traders, who don’t wait for a perfect setup to form, end up losing their money very fast because they neglect their trading edge and are only gambling instead.
Make sure you emphasize the importance of steadiness in your trading plan, this way you will be reminded each time you read it why being a patient trader is so critical to making money in the Forex market.