Do you know how to make a Forex trading plan that works? One that tells you when and how you should trade. If not, then you're in the right place!
Making a Forex trading plan that works, will then provide you with rules to follow and allow you to plan ahead of time. So you are able to control your emotions in trading. You should include written guidelines to follow, and trade management rules with your trades.
Most probably just like you now, I jumped into trading and gave no thought at all to creating a Forex trading plan. If only I knew then what I know now!
You see having a plan already in front of you, will be like having a rule book that tells you exactly how and when you should trade. This will ensure you have a consistency as a Forex trader, with following the rules you have set forth.
Many new traders never even create a Forex trading plan, let alone use one on a regular basis. It's very important to your trading success that you do both: create a trading plan and use it!
Don't just create a plan and never use it, like most new traders do. With trading Forex... it's some what different to the conventional working job, with there being no rules.
There's no one there to tell you how much you should be trading, or when and how you should trade.
So why is it important to have rules with a Forex trading plan?
Rules are an important part to Forex trading, as without rules you are really just like a gambler in a casino.
How should I approach this then?
Another way to look at a trading plan is... to think about a trading plan as a business plan. Just like any business you would start, with how you would run and operate the business.
To be successful in Forex trading. you need to have these essential things that you are following...
- Create a Forex trading plan (and use the plan)
- Create a Forex trading journal (of trades you take)
- Use them both above to become a disciplined trader
With how to make a Forex trading plan that works, and actually creating a plan, even more so with price action trading. Will give you a solid foundation and a good understanding of the strategy you are implementing in the markets. In essence, this will provide you with a blueprint guide to your trading.
Can I have an example of a Forex trading business plan?
Great news... get my Forex swing trading blueprint guide today, and get a head start with how you can create a Forex trading plan. Now as well as a trading plan, it's also just as important using a journal to log each trades you take. It's vital to your success as a trader so you can see exactly how your ability as a trader and strategy is performing over time.
Knowing, if you actually have a trading edge! Having this information, will allow you to tweak your strategy and plan to achieve better performances in the future.
What's needed in my Forex trading plan?
Forex trading plan contains:
Your Forex trading plan will need to cover each scenario you may come across with your trading. Put simply, you need to have a trading routine within your trading activities. Without this, things can take a nasty turn!
Believe me I get... when things go wrong in your trading, for what ever reason. You will wish you had that trading plan and journal to know what went wrong. Many occasions when I started trading, I took losing trades to find myself confused and to be honest in shock why I kept losing. From there, frustration creeps in and before you know it...
you've blown that account again!
Your Forex trading business plan needs to include a check list that you can follow. This needs to include things that are important for you to follow within the market and what you need before entering a trade.
If you create your whole trading plan as a checklist, this will make your trading decisions run more smoothly with knowing if a trade is worth entering or not.
What else should my trading plan include:
In your Forex trading plan, it's important to have written guidelines for you to follow. So you know in advance what actions you take prior to any setups. It can also be beneficial for you to have chart images of previous trades, so you have a visual aspect of what to look for.
What written guidelines are needed?
That's a good question...
Your plan should have a written description of each steps you would need to take in the markets.
This would include things such as:
- What time frame you trade (Daily is my preferred time frame)
- When you take a trade
- How you will trade it (See more on trade management further below)
- Do you have a trading edge
- Risk management
- Profit targets and overall % goals
If you follow your checklist and chart images for long enough, you will start to know exactly what is the ideal trade setup you are looking for. In Forex trading, this is one key component to your success, being able to filter out the good from the bad setups. Following your checklist will also make you into a more disciplined trader, gaining confidence with each trade you take.
Planned ahead of time
Another advantage with following a Forex trading plan and checklist. Will give you the skills to pre-determine and evaluate a trade setup ahead of time. For one, this is going to be the best way to profit from the markets over the long -run.
Whenever you are not in a trade, is going to be the only time you are uninfluenced by the markets! In essence this will help you towards keeping your emotions under control and not over trading.
In fact... I only wrote an article the other day, all about emotions in trading. I suggest you check this article out once you've finished reading.
I covered what you should include in a checklist above, but I wanted to cover trade management in more detail.
Once you have created the checklist with trades you want to look to take. You are then going to need to include in your plan how you will manage your trades. With the markets having no rules in place, this is one of the most important steps to follow.
With there being no rules, once you're in a trade there won't be anyone to tell you when to take profit or cut your losses. So without adding this to your checklist you won't know how to manage your trades.
But... that's the easy part isn't it?
No... by no means is this easy, for one:your emotions will take a large roll with trading. So without a set of key components to your checklist you won't have any way to keep them under control. This will then bring out GREED and FEAR in your trading.
So you must not forget these important things on your checklist:
- How much you are willing to risk per trade (for me this is a account %)
- Where you will place your stop loss
- How you will place your profit targets
- How often will you check the trades (If trading the Daily I only check once a day)
The more consistent you stick to your plan, the more consistent your profits will be.
Write It and follow it!
Your trading plan is going to be useless until you have written it down.
Don't make the same mistake I made when I first started trading.
I have my plan in my head!
Having your plan in your head is going to be a waste of time. Because when it comes to making those important trading decisions you will break under pressure.
And... the plan goes out of the window.
So write out your plan and have it with you at all times when you trade. Now make sure you follow it, I mean you wrote the plan for a reason so make sure you follow it! I know it may sound simple to follow the plan you wrote, but when something looks OK you fail to follow it.
Always give your Forex trading plan a chance
There's no point spending the time, creating a plan to then throw it out as soon a trade loses.
I mean... you start using your plan, you make some winning trades. Then after this you take a few losses, and before you know it you've slung the plan and forgot about it. You need to give the plan a chance to perform. By this I mean over a number of trades.
Not just a few but a good amount of data is required, to see if the plan is working.
Remember this quote..
"Plan your trade and trade your plan!"
wrapping It up
So, lets wrap everything up.
You need to make sure you know how to make a Forex trading plan that works and you actually write it up. Also make sure you make a checklist within this plan. One that you can follow with chart examples as well, to help you identify future setups.
It's also important you keep a trading journal to keep track of your trades success. Knowing how you are performing with each types of entry will help you to eliminate future bad entries. Using a trading plan, is also going to let you plan ahead of time. Knowing what you need to do before it happens. This will take out any emotions you may come up against when trading.
the key trade management steps you should follow. This will make you a more consistent trader and have more consistency with your profits. Always write your plan down, trying to use a plan in your head is setting you up to fail.
There's no point writing it down and not following your plan. So make sure you follow your plan each time you take a trade!
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