Forex Trading Plan

Forex Trading Plan

You need a proper trading plan to succeed in Forex trading, without proper planning, no task can be truly successful. Forex trading is not an exception for that. So it is recommended for you to understand the necessity of a Forex trading plan and use this plan against your opponents.

In this article let’s see about Forex plan example, including its goal, market, research and fundamentals, strategy, rules and more.

What is Trading Plan?

For your trading activity a comprehensive decision making tool is a trading plan. It helps you to decide what, when and how much to trade. It should be your own, personal plan, at the same time you use someone else’s plan as an outline but remember that someone else’s attitude towards risk and available capital could be vastly different to yours.

You need a trading plan because it can help you make logical trading decisions and define the parameters of your ideal trade. A good trading plan will help you to avoid making emotional decisions in the heat of the moment.

How to Develop a Forex Trading Plan?

Forex trading plan is peace of information about the trader’s current market considerations. These plans have information’s about open trade price levels, technical and fundamental indicators, trader’s goal, plan about the right timing to close a trade.

Traders can define their opinion, opportunities in Forex trading plan. Trading plan significantly impacts post-trading analysis because traders can see where mistakes takes place.

If you want to develop your Forex trading plan you need to define goals and expectations, approximately average trading duration and style, important economic and technical indicators that you want to analyse.

In the next step, you need to set entry and exit trading rules that you will strictly follow in your trading plan. Always you need to keep records and notes about your open and close positions and your thoughts that were the reason for your actions.

Forex Plan Market

Once you have finalized your goal, lets now take an in depth look at your target market. Your trading style should be day trading as all the traders are mostly placed in the time period. On certain occasions, you may attempt trading at a bit earlier time for a quick experiment.

Once your goal and idea about the target market are set, it’s now time to talk about the research and analysis you will need to perform. Forex trading is profitable and lucrative. But, the market is extremely volatile and dynamic.

So you must have a strong idea and knowledge about market situations and what’s going on in the market. Its recommended you to create a trading plan, each day before you start trading. But this trading plan will be valid for that particular day only.

In addition to filling up the trading plan, you should also do some research about the markets fundamental data. In this way, you will generate a strong idea and knowledge about the market. It is also recommended for you to take a closer look at the technical data as well. If you want to understand if there are any signs of technical movements, you should try to figure out the past seven days’ technical data.

Since this trading plan mostly focuses on day-trading, you should consider looking into candlestick charts.

Forex trading plan
Forex trading plan
Forex Plan Strategy

Designing along with the proper trading plan, is the key to your trading success. You should consider establishing a minor trend first. Although if you look at the 4-hour chart, you will get a broader view of the overall market. But it’s still recommended that you focus on the short term trends.

If there is any consolidation or if you find any non-committal movement on the minor trends, then its recommended that you stay out of the trading until its represents itself. To find out where the market is moving, you can use any western technical analysis techniques.

Technical Analysis

Technical analysis should indeed be the basis for your trading. It would also help if you even looked at the fundamental information that may come out from time to time. For instance, if the market swings against the trend, you should focus on the trend reactions strength.

As a first step where you should determine whether your short term trend is bearish or bullish.  You should also check if there are any key psychological numbers and support points available. It’s better to analyse the short term trends and then take decision accordingly.

If there are psychological numbers and support points available, you should wait until the market reaches the numbers and look for a reversal. You may need to trade against the trend if there is a candlestick reversal pattern with the confirmations such as hammer, shooting star, morning star, and bullish engulfing.

Set the limit at around the 50% fib retracement level, if you are trading against the short term trend. During consolidation you should not trade. It would help if you closed out a trade whenever the MAs cross against the trade position.

Attempt to make at least ten tics every trade, and you should stop at forty tics. Trading momentum must correspond with the short-term and it will help you find out the ideal entry point. You should get out of the trade before any economic information is released.

It will help you if you got out a trade whenever you think it can go against you. Don’t make a trade within the ten minutes of the class ending. So in Forex trading plan, you can create your own format, you should describe your opinion on your beliefs.

The best Forex Investment Plan

Once of the best Forex investment plans is when traders trade on several accounts. If the trader uses one long-term trading account, accounting for swing trades and day trades. In both accounts, traders will manage a small amount of money and add more money in the future if the trading performance is satisfactory.

Traders usually manage trades in long-term accounts every few weeks or once per month. This rebalancing is important because of two things, either the trader will close some currency pairs and add new positions, or the trader will stop loss and target based on the current market environment.

Every month traders and evaluate trading accounts and add or remove money from them. One of the best Forex investment plan is following trends on regular interval, this is the best way to learn to trade currencies by analysing, tracking and following daily or weekly trends.

Forex market is highly volatile as many events across the global impact various currencies, simply the U.S dollar can hike if the federal reserve cuts the rate, or a war in Iran can diminish its value as well. So it is susceptible to happenings around various countries.

You can have a close look over daily or weekly charts to notice patterns in the Forex market. The fascinating thing here is that even a small trader or move can have a larger impact on profit or loss.

The Bottom Line

Sometimes there is a misconception that you need highly evolved market knowledge and years of trading experience to be successful. If you don’t know where you are going, any road will get you there. The final objective of your plan is to obtain a comfortable personal situation from which to trade with, as little pressure as possible. Becoming a consistent trader is more like a marathon, rather than a sprit. By following a structured plan, you will become a specialist of your method. And that is possibly the most powerful attribute a trader can possess.

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