From a practical point of view, it is not difficult to make a transaction in the foreign exchange market. But you want to profit, not just a process.
What should a trader do to get income from his activities?
Let’s take a step-by-step look at the entire cycle of making a deal by a trader, namely the trader’s trading plan.
What is a Trader’s Plan, and what is it for?
In short, the action plan to trade is as follows:
- Monitoring the chart of the instrument you have selected.
- Drawing up a trading plan.
- Entering the market by opening a position.
- Exit the market by closing a position.
- Analysis of the actions taken and the result obtained.
Now in more detail.
Monitoring the schedule, you turn on your computer, load the trading terminal and start analyzing the market. Your task is to track the appearance of a situation favorable for entering the market. For this purpose, you can use graphical analysis, study various indicators’ behavior, and track economic news depending on your trading system.
Drawing up a trading plan for a trader
Now, the moment has come when all the conditions of your trading system are met, and you are ready to open a deal. Before doing this, you draw up a trader’s trading plan, in which you indicate:
- Date and time of the plan.
- The instrument for which you plan to open a deal and the nature of the operation (buy or sell).
- The reasons why you consider it possible to open this deal.
- Levels of limit orders and their justification.
- Risk management for the current situation. Here you specify the trade volume, the remaining free margin, the tactics used, etc.
- Reasons for changing the trading plan. This is where you specify under what conditions your plan can be changed. For example, the market does not develop as you expected, breaks the trend line, and, to reduce losses, close the position without waiting for the stop loss or a significant acceleration of the market will allow you to push take profit to another level.
After drawing up a trading plan, you, as a trader, will have direct instructions on hand that will save you from the need to analyze the market, having an open trade, when the analysis is not objective due to human nature.
Opening a deal. After writing a trading plan, opening trade will not be as stressful for you as if you did it without a plan. Following your instructions, you open a deal with a market order or a pending order indicating a stop order and take profit. The most exciting stage of trading has begun. You can follow the market or do other things. The main thing is to step back a step from your plan. Have you considered the reasons why the plan might change?
Closing a position. The moment has come when, according to your trading plan, the trade is closed. This can be a close-by a stop, or a take profit. Or maybe the changes you provided have come into force, and the position is closed manually. It doesn’t matter how you did it, it’s time for the last stage of trading.
Analysis of the actions taken. The deal is closed, the emotional stress has passed. The time has come to analyze the actions taken. Moreover, this must be done regardless of whether the deal was profitable or unprofitable. Have you considered everything in your trading plan? Maybe you have discovered some new circumstances that must be taken into account in the future. Or maybe you still broke your plan? So why? Did it bring you luck or, on the contrary, did you fix a loss? You have to find answers to these and many other questions for the sake of successful trading. Your trading plan will greatly help you with this, which you can analyze immediately after closing and in a year or two, from the standpoint of new knowledge.
Now you can imagine what successful trading consists of. Most of the time, trading is a tedious job and not everyone can take it. Only for diligent work will you be rewarded; otherwise, you will have to pay in money. If you are not afraid of such difficulties, take action now. Write down what you still need to learn on a piece of paper and make a plan for your cultivation. After all, you have to change yourself. Perhaps reading books about Forex success, you have come across the idea of dividing days into successful days and not successful ones. The day on which you did something to get closer to your goal, call it successful. If you have not done anything for your goal, then such a day is not successful for you because this day pushed your dream further. Do not be lazy to maintain the Trader’s Plan, and your work will turn into profit.
New to Forex trading? Don’t miss these beginner guides from FXCC.