1. Why did you start trading?
2.When can you trade?
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
Risk Warning: Investing in Margin FX products carries a high degree of risk and is not suitable for all investors.
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