It is so easy to get caught up in the flurry of activities involved in forex trading without a good trading plan. From reading your charts and watching price movements to consolidating your gains and losses at the end of each trading day, there are just too many things to look at in making sure that you are trading properly and that you are on your way to successfully building your trading account. A forex trading plan is a necessary part of your trading activities to ensure that you are on the right track.
A good forex trading strategy should guide you every step of the way and ensure that you actions are congruent to your trading goals. And so, the first step to devising you forex trading plan is to get a grip on what you want to achieve in your forex trading. Make sure that these goals are realistic and attainable. You do not have to settle for less than lofty goals that let you just cruise by without much movement in your trading account. The truth is that most people get into forex trading because of the lure of hefty gains within short periods of time. Your forex trading plan should pin these expected gains to a specific amount gained over a specific period of time.
The next part of your forex trading plan would be to determine your entry and exit strategy. This has a lot to do with how much money you have in your trading account and how much of this money you are willing to risk in your trades. There is such a thing as leverage and margin that you can take advantage of to boost you ability to profit in forex trading. Decide on how high a leverage you want to make use of to maximize your potential gains without risking your trading account. And then, you also have to think about what indicators to base your entry and exit strategy on. Whatever these indicators are, make sure that you have the necessary trading skills and tools in order to trade these indicators with accuracy.
Your forex trading plan should also tell you when you should exit a trade whether to pull in the most profits or to mitigate potential losses down the road. You cannot simply get into a trade and just wing it. You have to have a good idea as to the risks that you are facing and enough sense to get out of a trade when indicators tell you that there is nothing more for you to look forward to by keeping your position open. Remember, however, that your exit strategy has to be based on clear indicators rather than on emotions. Most traders find it difficult to wrangle with their emotions when things do not seem to be moving in their favor even if their technical indicators and patterns predict some favorable price action within their pre-set trading period.
It is important to devise a forex trading plan during a time when you are not yet in active trading. It is at this point in time when you are the most objective and least emotional about your money. During trading, have the discipline to follow through with the rules that you set for yourself in your trading plan to realize the gains that you set out to achieve with your trading activities. At the end of your trade, analyze your plan and revise if necessary for better profitability.