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    How Do I Build My Forex Trading Plan

    If there’s one thing you need as a Forex trader, it’s a trading plan. It’s an invaluable asset whether you’re a trading seasoned pro or just starting out. Why? Because it solidifies your strategy and helps to quell any fear, procrastination or anxiety that can otherwise cloud decision-making. Setting clear expectations and goals will help you to refine your trading skills using measurable results.


    So how do you start making a plan? Begin by writing down your answers to the following three questions:

    1. Why did you start trading?

    Is it to eventually replace your current income, or to learn from the market and apply that knowledge over time?

    2.When can you trade?

    We all have the time to trade: it’s just about prioritising and using your availability wisely.

    3.Are you a short or long term trader?Can you check trades multiple times during the day, or will once a day or week be better suited to your schedule?
    Locking down your trading plan components
    Next, it’s time to nail the details of your trading plan. Outline each of these points as it applies to you:

    1.Defining specific goals
    How much can you see yourself making in the short, medium and long term? It helps to be specific: for example, setting the target of a 10% profit by the end of the month.

    2.Focusing on markets
    There are infinite options for trading but it’s better to master a few options than to try to be a “jack of all trades”. Depending on your availability and analytical choices, you might choose to focus on indexes (for longer term trades), commodities such as gold and silver, currencies or CFDs. Choosing just a handful will also make research and analysis easier.

    3.Outlining money management
    How much should you risk with every trade? This is an incredibly important decision and can help you keep emotion out of your trades. If you decide on a limit of 5% for any one trade from your $10,000 account, that would mean a maximum $500 for a single trade. 

    4.Working out your risk to reward ratio
    You’ll only want to choose trades that offer a decent return for your risk, so it pays to include a ratio in your trading criteria. Risking $2,000 to potentially make $1,000 is a preferable situation to risking $2,000 in order to make $100. Your risk to reward ratio is calculated by dividing the reward by the risk, so a $2,000 reward and $1,000 risk would equal a ratio of 1:2. You’ll also need to factor in the spread of each trade accordingly.

    5.Finding your trading strategy

    There are so many trading strategies available for determining your entry and exit criteria, and defining one is crucial to minimising hesitation and building confidence. You might also decide to take action on our trade of the day in the morning report, or to set up free SMS alerts for economic announcements and specific trading setups. 
    Remember that even if you’ve made a losing trade, it’s still not a ‘bad trade’ as long as it conforms to your rules and the analysis you’ve committed to. The right plan will allow you learn, adapt and improve on your decisions. If you need advice, your account manager can help you develop a strategy that suits your style.

    Risk Warning: Investing in Margin FX products carries a high degree of risk and is not suitable for all investors.
    Feeling ready to trade for the first time? Get started with a Demo or Live account today.