Building a trading plan is an important part of having a successful trading career. It is extraordinary the amount of traders that don’t use a trading plan and still wonder why they are not making profits.
In this edition of my foreign currency exchange trading tips I will be describing how to write a trading plan that will enable you to trade efficiently and grow your capital month after month.
What is a trading plan?
A trading plan is an action plan that summarizes the trading strategy you've planned to use, the risk and money management system you choose, and any additional significant details about your trading approach.
Your trading plan will direct you during unstable market conditions: One of the primary benefits you will enjoy when you use a Forex trading plan is that you will always have a reference to go back to during unstable market conditions.
Successful FX trading takes a large amount of planning, commitment, and even a little bit of luck sometimes. When you use a Currency trading plan you are creating a back-up plan that will help you to take intelligent trading decisions even when the markets don’t make sense.
Failing to plan is planning to fail: Each and every successful trader plans his trades. Most unprofitable Currency traders lose money because they do not have a trading plan. The majority of them trade several trading systems but they never focus on just one.
A trading plan allows you to stay focus: The high level of excitement that is associated with Forex trading prevent many people from concentrating and making large profits. This is why your trading plan will be your roadmap to profitable Forex trading since it helps you to stay focused.
You have total control of your risk when you use a trading plan: Risk can not be eliminated from trading but it can be significantly decreased and controlled. Every trading plan should have a section dedicated to risk and money management. In this section you should stipulate all of your risk parameters such as: maximum risk per trade, maximum account risk at any given time, and much more.
You must customize your trading plan and make it fit your trading needs: Every trader is different and each trader should customize his/her own trading system so that it fits their investing needs and unique financial situation.
Make changes to your trading plan along the way: Another necessary step you will need to take as a trader is updating your trading plan.
The Forex is an ever changing landscape and as traders we have to adapt to and change with the market. When you make consistent adjustments to your trading plan you will ensure that your trading plan matches your trading goals.
Find what works and stick with it: This has been one of the greatest lessons I have learned as a trader, investor, and as a person. Once you have found something that works, you must stick with it and be constant, that’s the only way to achieve real success.
Foreign currency exchange trading will require you to plan your trade and trade your plan, that’s the only method to obtain the results you have always wanted.
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