Why Do You Need A Forex Trading Plan?

[Magnificent]

The post sums it up that you can’t stand a chance in the forex market without an effective trading plan or strategy. Having a plan of action is important and it will keep us on track too. New traders should always enter the market with a plan rather than just figuring out as they go.

 

[Wordplay]

If you don’t have a proper plan and if you don’t know how to execute it, you’ll quickly lose the game. The art of trading is for those people who have knowledge and skills; without proper planning, those become waste. Without proper planning, trading will go into another direction.

 

[Zygosis]

A trading plan is necessary to stay in focus of the bigger picture which is to receive consistent profits regularly. It helps you maintain discipline in your decision making skills and balances out any unnecessary data that may flow your way. A trading plan helps minimise risk and creates space for more returns.

 

[Gumshoe]

You don’t head on to a journey without knowing where you want to reach. You also don’t start cooking without knowing what the final dish would look like. You also don’t study without knowing what you want to become. The trading plan is meant to help you with your preparations just how other things in your regular life are done.

 

[Chatterbox]

This is a very relevant post and all newbie forex traders should definitely read this. I often see that new traders get into trading without a plan or strategy. And some beginners who enter with a plan get blinded by greed and deviate from it. So having a plan and sticking to it is very important for success in forex. Thank you for taking your time to post this.

 

[onomatopoeia]

If you are trading without a plan then you are just gambling, and it won’t have the results you would have desired. So, make sure you have a trading plan and a solid one if you want to succeed in this field for a long term.

 

[Genetrix]

A trading plan is a basic necessity of your trading career. As your goal will obviously be to move ahead, you will need to have something in your hands that you can follow. It will also help you track your performance and make changes to your trading techniques if they don't work well.

 

[Joo]

Markets are by definition volatile. There is little chance that you will be able to predict every move and react in the way needed. That’s why having a Forex trading plan is important. This plan will ensure when you trade, it is with purpose, rather than on a whim. A Forex trading plan takes the emotion out of price action trading, introducing discipline and a process designed to lessen the impact of mistakes.

Why do you need one?
Humans are emotional and prone to over-reacting to events. This lack of farsightedness, encourages traders to open positions which in the cold light of day they never would of. Some traders are more emotional than others. You can’t stop yourself from having emotions but you can reduce their impact. Reacting to events and letting emotions dictate your thought process is not a good combination!
This emotional approach to life makes humans poorly set up to trade. We are also easily distracted. We see a price drop and immediately assume it is a buying opportunity. Yet our first thought should be, does it fit into our own pre-established plan? A Forex trading plan ensures that if you follow its rules you will not let emotions get the better of you!
A Forex trading plan also helps stop mission creep from setting in. This occurs when your initial aim is met but you hang on longer in the hope of making even more. You usually end up losing it all in the process! That’s why creating a trading plan which has exit parameters is important, as it will help you trade successfully.

How do you create one?
Creating a Forex trading plan is not something which will happen overnight. It takes time. For traders learning to trade Forex, it is worth starting with a demo account before opening a live trading account, You can go to fxcashbackking.com to find the right broker for you. This will give you a chance to test your theories, make mistakes, discover what kind of trader you are and the strategy which works for you. Once you have worked out if you are a swing trader, scalper or prefer other day trading strategies, you can refine your trading plan. You may consider using candlestick patterns to help you.
There should be a healthy dose of reality in your Forex trading plan. For example, you should have worked out your objective. Are you looking for a 2/3% profit over minutes/hours, or are you looking for 10-15% over a couple of days? Working out what position size you should be taking for your strategy should be paramount. Taking small positions, such as 2/3% of your portfolio, is the name of the game. Understanding your weakness, and having exit strategies should also be part of your Forex trading plan.

Learn to adjust your Forex trading plan
Every Forex trading plan will have to evolve at times. As you develop as a trader, you will want to record your experiences to be able to go back and review where you can improve. You should not fear making mistakes, as these experiences will help you grow as a trader. Many aspiring traders will start by copying someone else’s Forex trading plan, strategy or ideas. There is nothing wrong with copying a winner, but evolving that plan into one which fits your trading style will ensure you trade profitably regularly.

What is your risk tolerance?
When creating a Forex trading plan, you will need to decide what level of risk you are prepared to take. Your ability to stomach risk will be dependent on how much you can financially lose, and how much your emotions can handle losing. This will be different for each trader. Creating a risk management plan with rules to encourage you to step away when you’re having a bad day will keep you fighting for another day! This can be as little as 1% loss per day for some and 10% loss per day for others. Separately a risk-based approach, where you prioritise risk management over trading profits can also help.
Conclusion
Entering the trading arena without a Forex trading plan is foolhardy. In life there are winners and losers. Winners lose all the time but learn from these mistakes to create a trading plan which evolves with their experiences. Losers never learn and keep losing. Which are you? You will lose money on trades but you will also have profitable trades. In time your Forex trading plan will help you reduce the former and increase the latter. Developing a Forex trading plan will help turn you into a consistently profitable trader.

It's true

 

[Christine Ramon]

Like everything else, in forex, if you know what's one step away, your steps will be more solid and safe

 

[Subfocal]

It might seem time consuming to build a trading plan. But it’s better to spend time building a trading plan than to get baffled when you are trading in the live market with your money at risk. When you are prepared for all the situations that may come by, it gets easier for you to stay on track.

 

[Hash36]

This is very helpful to new forex traders like myself. I wish I had started this when I first started trading. Thanks for the information.

 

[pawned]

Helps with consistency. Following a plan and having a strict set of rules, you can keep repeating successful trades.

 

[pawned]

This is very helpful to new forex traders like myself. I wish I had started this when I first started trading. Thanks for the information.

Same, Im in a few years and I still struggle with sticking to a plan but id I had even the slightest clue when I first started, this would have saved me a lot of time, money and mental anguish

 

[Asteism]

You need a trading plan to stay focused on the end goal. You need to build a strong trading structure so you don’t get distracted. Hard work and strategic moves only make your A-game. So, as long as you stick to a plan, you’re closer to earning consistent profit.

 

[Contraband]

A trading plan helps you keep emotions away from your trading decisions. When you have already decided how much profit you will be happy to take and how you will cut your losses, there is no room for distractions to take you on the wrong path.

 

[deaddog]

A trading plan helps to plan your trades and manage your risk. It's a helpful tool that you can use to manage stress and keep your emotions in check.

 

[Mucivorous]

Without following a plan, you will be in constant stress because you will not know what to do next. It is crazy that so many newbies leave the market because of silly errors. Hence, hard work is important and so is making each minute count. A trading plan helps keep focus on managing risk and money, timing trades and helps you stay on the path to success.

 

[EliseoB]

This is very useful information, always have a plan and remember of you start to listen to your emotions stop and walk away it will reck yous

 

[Seminule]

A forex trading plan is an essential tool for any trader looking to achieve consistent results in the market. Without a plan, it is all too easy to get caught up in the excitement of the market and make impulsive decisions that can lead to costly mistakes.

 

[Overpoise]

You won’t be able to survive in the forex market without a proper trading plan to follow. It should cover all aspects of your trading and must be aligned to your goals as a trader. New traders often deviate from their plan and take up trades just because they feel like it. So, we must refrain from emotional trading and just stick to our plan all the time.