Developing A Trading Plan

The importance of a plan
'Fail to plan, plan to fail'

No matter which trading style you decide to pursue, you need an organized trading plan, or you won’t get very far. The difference between making money and losing money in the forex
market can be as simple as trading with a plan or trading without one.

Key component of a trading plan:

1)Determining position size: How large a position will you take for each trade strategy? Position size is half the equation for determining how much money is at stake in each trade.

2)Deciding where to enter the position: Exactly where will you try to open the desired position? What happens if your entry level is not reached?

3)Setting stop-loss and take-profit levels: Exactly where will you exit the position, both if it’s a winning position (take profit) and if it’s a losing position (stop loss)? Stop loss and take-profit levels are the second half of the equation that determines how much money is at stake in each trade.

That's all. Yet, it is so stunning how many traders, experienced and beginner alike, open positions without ever having fully thought through exactly what their game plan is, what they aim for, what they really want.

And no matter how good your trading plan is, it won’t work if you don’t follow it. Sometimes emotions bubble up and distract traders from their trade plans. Other times, an unexpected piece of news or price movement causes traders to abandon their trade strategy in midstream, or mid trade, as the case may be. Either way, when this happens, it’s the same as never having had a trade plan in the first place!