Forex Trading Plan
Business and commerce

Forex Trading Plan

Forex Trading Plan

What is a Forex Trading Plan?

A Forex trading plan is an algorithm of actions that must be followed during the trading day. It is difficult to imagine a company without a business plan written on paper. So in trading without a trading plan, all your actions are doomed to failure. The lack of a Forex trading plan is one of the reasons why traders lose money. Another important point is that your trading plan should not be in your head, but written down on paper. You would probably be very surprised if you found out that an entrepreneur does not have a business plan or keeps everything in his head. You must understand that no business can exist without a business plan written down in advance. In trading, you need the same approach if you want to become a professional trader and earn a living by doing so. Take a few hours and write on paper a detailed trading plan, so that you can always see it before your eyes, and you can look at it to understand whether it is worth entering the market now and when to fix the profit or loss.

How to Prepare a Forex Trading Plan

Entry signals

Probably each trader was overwhelmed by the same feelings watching the price skyrocketing or dropping, with the irresistible desire to jump in with both feet being sure that this is the time to make real money. In a moment you look at the placed order with no idea how to handle it now, what profit to expect, and has just happened. Sounds familiar? 99% of traders were in such a situation, particularly on the very first stage of familiarizing yourself with trading.

forex trading plan 

That is why the Forex trading plan must cover a precise explanation of the entry signals the trader is plotting to employ in the trading strategy. Right after these “beacons” are outlined and written down, make sure to rigorously stick to them. Naturally, before-mentioned signals have to be as clear as possible to avoid any unpleasant consequences. Strictly speaking, in case there are four price action patterns implemented in your trading strategy, all four of them must be added to the market entry signal of your Forex trading plan.

Exit signals

The same situation is with the market exit signals – all traders need to have a clear picture of what the exit signal is when creating a Forex trading plan. Yes, placing orders in time and choosing the proper assets is vital, but without closing the position in time, all of that will make no sense. Exit signals may even be the most important aspect here since trading is about making money. Consequently, without smart market exit, you risk closing the position too early and missing the opportunity to get bigger profits being impatient or just lose it all waiting for too long.

If your trading plan includes exit signals, you will not find yourself in such situations. Any plan will be incomplete without marker exit signals since traders need to have a crystal clear understanding of what profit is foreseen from each trade, otherwise, the feeling of uncertainty will mess the whole trading up.

Stop-loss (SL) and a Take-profit (TP)

Since we have learned how essential entry and exit signals are when it comes to developing the Forex trading plan. They help you strictly adhere to your existing trading strategy, as well as exclude the likelihood of emotional interruptions into the trading process itself. One more essential aspect here is the setting Stop-Loss and Take-Profit for every position.

In fairness, we cannot but mention that setting Stop-Loss levels is much more crucial than Take-Profit. So, when preparing a Forex trading plan, all organized and serious traders have to keep in mind the necessity of placing Stop-Loss. It applies to every position, without deviations and excuses.

Apart from that, the Forex trading plan should include predefined Stop-Loss levels. Reasonably they may vary from asset to asset, but it must be there. On the other hand, predefining Take-Profit is not so significant. Nevertheless, if you want to develop the best Forex trading plan, it is advised to determine the Take-Profit levels prior to placing any position and add that to your trading plan.

A trading plan for Forex traders can change the whole attitude to trading. It turns the mentality upside down, shifting priorities. By creating trading plans, we begin to work effectively and reliably ensure ourselves against accidental losses.

Share on facebook
Share on telegram
Share on twitter
Share on whatsapp

Subscribe to our website

Get update & latest blog post

Neither PriceAction Forex nor, LTD (publisher of PriceAction Forex) is registered as an investment adviser nor a broker/dealer with either the U. S. Securities & Exchange Commission or any state securities regulatory authority. Users of this website are advised that all information presented on this website is solely for informational purposes, is not intended to be used as a personalized investment recommendation, and is not attuned to any specific portfolio or to any user’s particular investment needs or objectives. Past performance is NOT indicative of future results. Furthermore, such information is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All users of this website must determine for themselves what specific investments to make or not make and are urged to consult with their own independent financial advisors with respect to any investment decision. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. All opinions, analyses and information included on this website are based on sources believed to be reliable and written in good faith, but should be independently verified, and no representation or warranty of any kind, express or implied, is made, including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we undertake no responsibility to notify such opinions, analyses or information or to keep such opinions, analyses or information current. Also be aware that owners, employees and writers of and for, LTD may have long or short positions in securities that may be discussed on this website or newsletter. Past results are not indicative of future profits. This table is accurate, though not every trade is represented. Profits and losses reported are actual figures from the portfolios PriceAction Forex managed on behalf of, LTD.

Leave a Reply

Close Menu