Trading plan forex
But I'll have more about this in my upcoming Bitcoin article. The moment the trade has been entered the brain is no longer the same, it's been hijacked. Your risk capability goes out the window and you can only see the profit.
Trade Management may be Stage 2 but the planning for trade management still needs to be done before you enter the trade. Trade management is knowing any of the possibilities of harm that can come during the course of your trade, and what you need to do in these places.
Let's say the market is going up and it pulls back like in the image above. You mark out your stop loss and take profit. Then you mark out where you may have issues. There are 3 areas of potential issue. The first issue is the top of the range marked 3. As much as you want it to, you know it's not going to go in one sharp line up to your take profit. So, you need to know and have planned what you are going to do at each of these areas.
You enter a trade and it starts by going in the right direction and things are looking good! You were in profit but then you lost. Then after it turns around we think "Why didn't I close it? What if we had closed and it kept rising? It went past our take profit. We think, "Damn, why was my take profit so low" and the next time we make it bigger.
We are planning our exits on hope, or fantasy instead of planning them strategically. Usually when you enter a trade and straight away there is a reversal and it's down at your stop loss you panic.
The thing is, for most forex traders the problem isn't in developing a trading plan, it's in following it. There is an old saying among traders: It's the second part of that saying that's the most important.
Then again, if you have a shitty plan that you follow to the letter, you could at least improve it through evaluation. So what does a good trading plan look like?
Well, first of all you have to take your own personality and circumstances into account. For instance, a good trading plan has realistic goals, and to arrive at them you need to take into account how much trading capital you have at your disposal and how much time you can set aside for trading and learning about trading. Now also for Kindle. Not every trading strategy is suitable for every trader. Some strategies yield a high percentage of small winning trades, others a low percentage of big winners.
For some strategies you only have to set-up new positions about once a week, others are meant for intense intra-day trading. This is why Forex for Ambitious Beginners has a section on self-assessment, to help you determine what kind of trading personality you have. Self-assessment will help you find the trading strategy that's right for you, so that you can create working set-ups. A set-up is basically a collection of conditions that have to be met before a trade is opened and closed.
Remember that one of the most important parts of your trading plan is your exit strategy. Setting and keeping a stop loss and profit target is often what makes the difference between being a successful forex trader and a losing one, so be sure to spend time on this. Another important part of your trading plan is evalution.
You can't expect your trading plan to be perfect from the get go, in fact you can't expect it to be perfect ever.