Planning Forex Trading: Why You Need Trading Plan And How To Make It

Planning Forex Trading: Why You Need Trading Plan And How To Make It-In management, planning is the first stage of management processes. At this stage, we set goals to be reached, vision and mission, resources we are going to need, etc. Trading activities can't be separated from planning activities either. Without good planning, your trading will be disorganized and the result shall be inconsequential. If you've already had trading plan, then your job is to run it. But if you haven't, then start making one so your trading plan will be more focused, effective, and efficient.
planning forex trading

Another reason why you should make trading plan is to further separate your emotion from trading actvities. As we've known, the involvement of emotion in forex trading could end in disaster. Such disaster could be averted if we take the necessary steps to follow trading plan with discipline.

So, how do we make trading plan?

Don't see trading plan as a complicated matter. It is there to smooth out your activities, not make it more difficult. The principle 'keep it simple' also applied on trading plan. If it is too complicated for you to understand, then you won't want to use it either, don't you!?

Make the format of trading plan according to your preferences. If you like to tinker with numbers, use Excel spreadheets. If you like to note, you can make schedules. The point is how to make it so you enjoy trading to the fullest and able to manage it to the direction of your goal.

The format is up to you, but there are some important stuffs that should present in your trading plan for it to be good enough to be used.

1. Trading Goals
Create short and long-term goal, be it in terms of profits or experience. Make it definite, not abstract. Don't just write ,"making high profit"; define how much profit you want, $200? $2000? You could also make it into a training in discipline, such as "not touching the position no matter what happens until it touches TP/SL".

2. Time Limit
Put a time limit in your plans. It could be 'today', 'this month', or any period you wanted. After the period passed, you could review whether it reached your goals or not, and whatever else happened during that time.

3. Trading Strategy
Having a reliable tradings strategy is a must. If you haven't got one, do some test in demo account. A trading strategy at a minimum usually encompasses these points:
  • Trading Time
    Set your trading at a time that's convenient for you. It could be after your day work. It could also be a certain trading session; Asian session, opening of European market, etc.
  • Indicators
    Whether you use Moving Average, Fibonacci, Stochastics, a combination of several indicators, or even if you trade naked, you should mark them in your trading plan.
4. Money Management
Money Management is a crucial part of trading plan. It is very recommended for you to choose one money management, be it two percent rule, five percent rule, martingale, anti-martingale, or whichever else.

5. Evaluation and Improvement
You've put a time limit on your plans. The next move is to evaluate them periodically in order to improve the quality of your trading. No matter whether you've reached your previous goals or not, the most important thing to remember is that it is an input for your next trading plan.(seputarforex)