How to Build a Strong Trading Plan

Trading Plan

Famous author Brain Tracy said, “Every minute you spend in planning saves 10 minutes in execution; this gives you a 1,000 percent return on energy!” If you go in hiking without any compass or instruction, can you ever finish it? I know the answer will be a big ‘NO!’ Same goes for the business. No business can be successful without a plan. And asForex is a business, it deserves a proper plan too. Here are some tips about how to build a plan

  1. Evaluate your threats: It is very much essential for risk management and your strategy. According to threat tolerance, we can divide the Forex businessmen into two categories. They are –
  2. Risk Liberals are those who like to take the risk. They believe in the ‘No risk, no gain theory.’ But many Forex experts say this theory is bogus. Because when you take a massive risk, you have a chance to make a huge profit and loss at the same time. And many statistics show that 90% of Forex traders cannot succeed.
  3. Risk Averse are those who are unwilling to take any risk. They like to make a small profit out of a small investment. Their investments and profits are always small, and so are their losses. They believe in the ‘Little profit, little loss’ theory.
  4. Maintain your journal: Your journal is a record of your previous trades. This journal will include your entry-exit point, position size, ‘long’ position, ‘short’ position, results, and any other information that you need.

This journal will give you a clear view of your past and give you a lesson that will lead you to success. Visit this page and learn more about the disciplined approach to trading. Once you truly understand the importance of discipline, you will always trade with a journal.

  1. Identify market environment: The market environment is tough to predict. It can change now and then and take a wholly opposite look. So before making your plan identify the market environment.

There are many kinds of market trend goes on like – uptrend, downtrend, sideway-trend.

The environment mentioned above has different characteristics. Therefore, you should identify the market environment and make a proper plan accordingly.

  1. Follow risk management: Here, you are going to trade, not gamble. So always take measures to manage your threats. Stop-loss is the most familiar tool to reduce the dangers. Suppose you thought the price of a particular currency might go high within two days, so you had bought it. But after one day, the price started to go down silently; I mean, you have not noticed it at all. And when you have come back, you realize that it is too late. If you evaluate your threats and use stop-loss, you may lower down the risk So always take steps to manage your risk.
  2. Fix your trading style: There are four types of trading style in Forex, they are –
  3. Scalp trading: It stays for a few minutes or seconds in the market. This type of trading remains for a short time with a short take-profit and ‘short’ stop loss. This is the lowest period.
  4. Day trading: It usually stays for not more than one day. This type of trading usually opens in the morning and closes in the evening. It is the most popular style.
  5. Swing trading: Its longevity is for about two or three days. Sometimes nearly a week. Those who think that the price will go up within two or three days choose this style most.
  6. Position trading: Toholds a position for a long time is called position trading; its duration is sometimes for a year, month, or one year.

There are so many tips, and tricks are waiting ahead. But these are the most popular and necessary ones. So follow them and make a proper plan for yourself.