How does any income idea start? From developing a business plan. From a detailed analysis of the market, demand for a product / service, calculation of profitability, building a sales channel, risk assessment. All of this ultimately takes the form of a fairly large document, which in itself has value and can be sold to interested parties.
Trading on the stock and currency markets is no exception. A forex trading plan is a structured document that has several sections, each of which defines strategic objectives, performance methods, requirements for results, and timelines.
Why do we need a trading plan:
- Specifying goals. He gives an idea what, when and how should be performed. The general idea takes on a uniform form in the trader’s head. After stating the problem (task) there appears an understanding of which way to go.
- Systematization. Forex trading plan allows you to build a procedure that saves time, money and nerves.
- Discipline. Performing a sequence of actions helps to strengthen the discipline, without which it is absolutely not recommended to engage in trading. Chaos in actions is the cause of damages.
The main sections of the Forex trading plan and their structure
- Proper goal setting:
- Financial goals. Desired income by time intervals. The goal of the daily income, the final result for the year and the subtotals (week, month) must be clearly defined. If a loss is received on some days, the week (month) as a whole must remain profitable. If you can’t reach your goals, look for reasons.
- Individual goals. The distribution of time between trading and self-education. Education of character, self-confidence. Rest.
- Targets for risk. Determination of the risk management system on which the trade policy will be built. The size of the maximum loss and drawdown, the number of simultaneously open transactions, the calculation of the lot. Everything is commensurate with the level of the deposit and the volume of reinvestment.
- Preparing for trading:
- Conduct market analysis (see below for a separate section).
- Creating an inner attitude: psychological calm, positive, lack of fear (overcoming it), lack of excitement, readiness for moderate risk. If any of this is present, we recommend reading the article on affirmations.
- Elimination of external stimuli that could distract.
- Technical training. Checking the connection speed, running testers, calculators, platforms, etc.
- Trading Strategy:
- Determining the nature of the strategy: scalping, medium, long-term.
- Key characteristics of the strategy: timeframe, asset, tools used and their settings. Use advisors or signals.
- Tool definition. Fundamental or technical analysis, trading by news, patterns, levels, etc.
- Entry and exit conditions of the market: coincidence of any key and auxiliary (confirming) factors, setting profit levels, practice of using stops and pending orders, etc.
All these points should be thought out in advance and even better – written down for clarity. Goals should be real, but no one forbids them to adjust in one direction or another. If it becomes immediately clear that the forces are overvalued / undervalued, the plan is adjusted.
To be continued.