We have already talked about a wide variety of topics. You already have a great deal of knowledge, but you still don't have a trading plan. What I want to tell you is, You have a lot of information but without a good trading plan and the discipline to always trade on it, you will hardly be successful.
Compare your trading plan with a map that will lead you to success. He should constantly remind you how to make money with FOREX. Certainly a trading plan is not mandatory, if you have the iron discipline to trade successfully without a plan, then I bow to you and give you the title "Zeus of FOREX".
So you can also trade without a plan, but before you decide on this path, let me list a par reasons why you should have a trading plan.
Why You Need a Trading Plan?
Reason 1: He keeps you in the right direction
Having continuity is very important in the FOREX business, because you have the opportunity to actually measure how successful you are as a dealer. If you have developed a viable trading system but are constantly breaking its rules, you can then tell if your trading system is really good?
Your trading plan will help you not to lose sight of the goal. Read the plan every day and stick to it.
Reason 2: Trading is a business and behind successful business there is always a plan
I have never seen a successful company that was not started with a reasonable plan. You don't really think that IKEA was founded on a whim and suddenly became successful, or? Or what about McDonald's? I'm sure, everyone can make a better hamburger than McDonald's, but the difference between them and a househusband is that they have a good business plan that leads them to success.
In the same way, you can compare the McDonalds story with your trader career. Anyone can make money with FOREX, one has a little more luck and the next has more experience. The difference between a losing and a successful trader is in the trading plan. If you have a good trading plan and you have the discipline to stick to it, then you will be successful!
Now you know why you need a trading plan. Next, I'll show you what a trading plan consists of.
What Should Your FOREX Trading Plan Include?
Trading plans can be so simple or complex, as you would like it to be, but the main thing is that you really have a trading plan and you follow the plan. Now that this has been said,, here are the most important points that a trading plan should contain:
Your trading system
The trading system should be the heart of your trading plan. This system should be thoroughly tested and you should test it for a long time in the demo account. All important information of your system should be included: Time Frame in which you trade, One- and exit criteria, Level of risk on each trade, with which currency pair and how many lots you want to trade.
Example:
I am an intraday- Trader and use a 10- Minutes Chart. I get in when it comes to a moving average crossover and all my indicators provide the right signals. I only trade EUR/USD and I don't risk more than 2% of my trading capital on a single trade. For now, I act 5 mini lots and will be the lot size of the 2% Adapt my money management rules.
Your trading routines
This is a crucial part of your trading plan, because you are setting three very important points here: When to analyze the market and plan your trades, when you observe the market and then actually trade and when you evaluate your actions during the trading day.
Your thoughts
You can ask any successful trader and everyone will tell you that it is one of the hardest things to do when trading., Keep emotions out of the game. This part of the trading plan describes the framework within which your thoughts move, while you trade.
Example:
- I will see what is on the charts and not what I want to see.
- No matter how confident I am about the direction to be expected, I make sure that I only act according to what my eyes see and not what my feeling tells me.
- I try not to return the favor in the market if I lose a trade.
- I don't give up, if I lose a trade. Instead, I will consider it an experience, which helps me in my development into a successful trader and continue.
Your weaknesses
We all have our weaknesses. We just don't want to talk about it. But ask yourself the following question: "How do you ever want to get better, if you do not admit your weaknesses and thus do not know what you can work on yourself?" This section should be a help for you to recognize what you should work on yourself to become a better trader:
Example:
- I tend to overtir. If I lose a position, I get tingly and immediately try to return the favor on the market.
- I tend to close positions too early.
- I don't always stick to the rules of my trading system.
- I don't always stick to my money management rules.
Objective of the trading plan
"Making a lot of money" is not necessarily a good goal. Sit down and think about what you want to achieve as a trader. Do you want to trade to make a living? How much profit can you realistically expect, when you look at your knowledge and experience. Your goals don't necessarily have to be about making money. You may want to gain discipline or confidence. The goals can also affect your personality. What do you expect from it?? Use these goals as your motivation when things aren't going so well. The goals will be your vision, You should never lose sight of the goals.
Your trading logbook
This is an interesting tool to help you become a better trader. Enter all your trades and why you executed them. Later you can look back and evaluate your trades to see how they have developed. I read in my logbook and saw how I could improve as a trader. I have gained confidence during my career and when I look at my trades, I was able to evaluate myself and could see if I was approaching my goals or if I was moving in a different direction. With this tool you will improve in the long run, that's why you take a few minutes a day and enter your trades. You will be happy, to have done it.
Summary
Read your trading plan every day. You can have all the trading tools in the world at your disposal, but if you don't have a plan for how to use them, you will hardly be successful.
Remember, You start a business and if you want a successful business, then you need a plan.
