Sophia Todorova is the host of the live trading room for the London session. She has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.
Every trader should have a trading plan. The saying: ‘If you fail to plan, then you plan to fail’ might be a cliché, but it is none-the-less still very valid. A successful forex trading plan should start with a general outline, and then broken down to specifics. I personally, have a general trading plan, as well as a journal which I use to list my trades, and the specifics regarding setups. For my swing trades, I also note daily developments. Doing this is useful to be because it helps me to later evaluate my trading plan. Here are some guidelines to follow:
Expectations: Why are you trading the Forex, and what are your expectations? Good forex training will guide you in making reasonable expectations. By establishing this from the start, it will help to keep you on track in your trading, and ward off disillusionment.
Risk Plan: Decide how much you currently have in disposable income, and aim to gradually grow your equity. If you are still trading on a practice account, treat it as you would a live account, or you will be defeating its purpose. Once you start live trading, the transition should be easy. Do not risk more than you can afford to lose; you should not be traumatized if this does happen. You should also decide beforehand, the maximum amount of your equity you will risk on trading at any one time.
Types of Trading Accounts: Try to keep separate accounts for different trading strategies. If you enjoy day trading, as well as swing trading, you will be able to more accurately evaluate your performance on each strategy if you keep the accounts separate. This is not difficult to do, since many forex brokers offer the sub-account alternative.
Goals: Set reasonable goals on your expected returns over a period of time. This should be based on your strategy. Profit targets should be calculated on a daily basis, for day-trading, and swing trading on a weekly, or monthly basis, for instance.
Strategy: Detail each trading strategy you use, as well as the rules for their use. This should include your triggers, or confirmation setups that you need to see before executing a trade. You should also identify specific conditions for exiting a trade, at a win, a loss, or breakeven.
Evaluation: This is a critical process that should be completed. Evaluation allows for improvement in our trading. I recommend reviewing each trade that you execute. Ongoing evaluation is necessary in managing a swing/ position trade, but is useful to every type of trader at the end of the trade. We can rationally compare the trades with the plan we wrote, thereby recognizing trading errors we made, or a flaw in the trading strategy that needs to be addressed.
If we approach our trading in a haphazard manner, our results will reflect that. A trading plan lays the groundwork for future success.
Thank you. I hope that this article provides some important insight, but more importantly, the catalyst that will push you to making the commitment to successful trading by devising a trading plan. Please do leave your comments on useful tips that you use in your own trading plans. That would be very much appreciated. Happy trading, and a wonderful weekend to you.
You can aslo read my last technical analysis post here: http://winnersedgetrading.com/gbpusd-technical-analysis-2/