How to Develop a Forex Trading Plan
Developing a Forex Trading Plan goes further than entering a trade, spending some time watching the charts, exiting a trade, and taking home profits. Many factors play a part in both your performance as the trader, as well as how the markets perform, and how every factor works together to create a trading experience, given a particular situation.
It’s so easy to feel overwhelmed by all the different methods and strategies that you could employ to help you trade better. Here at Khwezi Trade, we can’t tell you what strategy will suit you best, but we can tell you what will help you find your method: a trading plan.
How to get started with a Forex Trading Plan
Starting your trading plan is all about having a framework from which to work that you know will help you trade better in any situation. We’ve set up a list of five things that you can add to your plan to get it started. From there, you can add points that you feel are important to include to help you on your trading journey.
1. Keep it simple
Trading isn’t about how complicated of a trading method you can master, or how intricate your knowledge of trading terms is. You’re not here to impress anyone; you’re here to achieve financial freedom through your own personal trading journey. Therefore, you need to find a strategy that works for you and execute it with the knowledge that you can turn a profit and understand the process.
2. Do your research
This doesn’t necessarily mean just hitting the books, there are many ways you can do research for your trading plan. Videos, tutorials, articles, and blogs like this one are all ways you can start expanding your knowledge of trading and understand why and how things happen. Start taking an interest in the forex market and why growth and drops happen. Here’s a list of forex market news sources:
Through research into trading-related topics, lucrative opportunities can be identified, giving you the chance to access markets and trade with pairs that could mean very good returns.
Here’s a list of posts that provide some relevant information on trading plans:
3. Set realistic goals
Saying that you want to put in R10k and make back ten times that amount within a week may not be the most realistic goal for a trader only just beginning their journey. We cannot say this enough: trading is not a ‘get rich quick’ game. There is no way to take a gamble and expect to turn profits from very risky trades. Understanding the difference between risk and reward and setting a profit and loss goal per trade is also a way to make sure you stay within a certain ‘safe zone’ when trading. When done properly, setting realistic trading goals can help to enhance your profit potential when executing forex trades.
4. Manage risk
Risk management is about knowing how far you are willing to allow a trade to go before it becomes too difficult for you to control and anticipate in what direction it could go. Know what risk management tools are available to you on your chosen platform. Remember to check out our MT4 platform for an easy and reliable platform to optimise your trading experience.
5. Psychological factors
You may not realise it, but your mood can be a direct influence on your trades. Negative emotions could lead to negative trades in that your assessment of risk could be off, and losses could lead to increased irritability and difficulty in controlling trades. Therefore it is important to enter trades with an open and fresh mind, and a positive attitude in every trading-related endeavour you take on.
Taking these factors into consideration is a great way to start your trading plan, and it’s important to customise your plan according to what your journey needs from you to do.
Key attributes of a successful mindset in trading
How To Write a Successful Trading Plan
Lack of planning is one of the leading causes for the failure of many businesses. Most successful people agree that if you want to be successful in life and business, you need to have a plan.
You need a plan to obtain that success, you need to set goals, and then work on executing your plan and meeting your goals.
Trading is no different from any other business in this sense that those who fail to plan their trading like a business, are doomed to failure. Trading is not a Hobby, Hobbies cost money, trading is a business.
Having said that it is important to have a written business plan for your trading just as you would for any other business.
Some of the things which should be included in that plan, write down these questions and answers
1. What are your reasons for wanting to become a trader?
2. What do you hope to gain from trading?
3. What Broker will you use?
4. What are the things that are going to separate you from the majority of traders who fail?
5. What are your biggest weaknesses?
6. What are your strengths?
7. Do you plan to day trade, swing trade, position trade, or a combination of the three?
8. What market or markets do you plan to trade and why?
9. What are your criteria for entering a trade?
10. What are your criteria for exiting a trade?
12. What is your money management strategy?
13. How much money do you plan to start to trade with?
There are many things to consider before jumping into trading.
From experience, those who actually take the time to think about and write down the answers to each of the above questions, have a much higher chance of success than those who do not.