By now, you must have realised the significance of having a Forex trading plan. But then how do you make one. What are the rules that govern the designing of a forex trading plan.
The forex trading plan can be considered to be successful if it gives the forex trader all the information that is required to start and complete the trade. The most important reasoning of a forex trading plan is to provide all information that in turn can give objectivity to the trader and remove the emotional aspect of the trade.
Forex trading plans basically will consist of technical analysis techniques which in turn give rules that can be used in the trading plan. The rules could be simple or complex based on how experienced you are in the forex trading market.
It would be wise on the part of beginners to garner knowledge on how to use rules and create trading plans from more experienced and successful forex trader who have with time understood the knick knack’s of the forex market.
The technical analysis of the market and studying it is an essential part of creating a trading plan and rule. Fundamental analysis of the market is as important as the technical analysis. Foresight regarding the forex market, understanding the volatility of the market based on the economic scenario of the market and then generating trade signals.
Over time, the trading plan can be re-planned, refined based on the issues that arise from the basic plan that was created. This comes only with experience.
The design of the basic forex trade plan and rule should consist of what unique points need to be observed and watched for in the trading signals. The next crucial point is the trading plan needs to tell you when to get into the market and when to exit the market. There might be times when entry and exit might not be completely right resulting in losses. Be prepared for the same, take it as an experience. The third final crucial point how large the trading position need to be.
The forex trading plan can be written as decision tree schematic diagram which can be kept as a ready reckoner. This helps in making quick decision while working live in the market. If you already have a sample trading plan in place, try it out! Understand the parameters, stick to it and see the results. If the results are positive then you can always just follow it. Make a new trading plan and rules only when necessary.It is with all seriousness that the statement “Time is money” is made when regarding the forex market. You need to be prepared before starting the trade; you need to know your trade plan and rules written very well. The decisions will need to be made in seconds and time lost in reading or trying to understand the trade plan while trading will be a blunder.
The final point is to understand the risks involved . Have a strategy on the size and amount involved. Learn on when to enter and exit. Losses might happen but a seasoned trader learns from the experience and takes the next leap!