Forex Blog

How to Develop a Successful Forex Trading Plan

how-to-develop-a-successful-trading-plan

Trading Plan is well organized approach and step towards success. Trading plan is key step to get success in execution of trading system with appropriate risk and money management. Majority of traders don’t have trading plan and this is the reason of their failure in forex trading.

Why Successful Trading Plan is Important?

Trading plan will help you to focus on your aims of trading and help to trade with excellent risk-to-reward ratio while using proper money management. Well created trading plan will also help you to control your emotions when you are trading and you can higher chances of profitable trades instead of losing money.

Note: It doesn’t matter how good you created your trading plan, if you don’t follow it in your trading system.

If a trader create good plan for trading and follow it strictly he can successfully survive in trading for years and can get out of stress with more profitable trade than losing money. Trading plan will make development in your trading discipline.

How to Create Powerful/Successful Trading Plan

To make successful trading plan ask some questions to yourself like,

  • Why you want to trade?
  • What is your motivation?
  • What are your strength and weaknesses?
  • Is your capital enough to achieve your goals?
  • How much you can take risk on trades?

If you ask yourself these kinds of questions than answers will help you to develop powerful trading plan. Your plan will help you to get profit from trading consistently.

Here are discussed some important steps that you should keep in mind when you are going to develop plan to get success in trading.

1- Mental Preparation and Motivation

Your trading place should be separate and free from things that distract you from trading. Take rest and don’t trade if you are angry or not mentally prepare to enter in trades. If you will do this definitely you will make losing trades.

Your motivation is an important step to create successful trading plan. Ask yourself that why you want to start trading and what you want to achieve from it. Keep all points of your trading plan in written form. So in final words we can say that you should be mentally prepare and free from stress before start trading.

Read: How to Choose Best Forex Trader

2- Skills Evaluation and Market Knowledge

While developing successful trading plan you should keep in mind, do you have tested your skills & strategy? And you are fully confident that you can implement it in your real trading? Your well verified strategy and skills will help you to take profit from market where majority of traders lose money because they don’t have necessary skills and knowledge.

3- Set Your Goals

Your trading plan should be ‘smart’, means you should know when you will enter in trade? What is your risk-to-reward ratio? How much time you will spend for your trading and what is your trading style etc.

Your trading techniques should be based on your personality and behavior. You should know your daily, weekly and monthly targets and use your trading system to achieve these targets.

successful-trading-plan
Step for Successful Trading Plan
4- Do Your Proper Homework

Before entering in market you should check what is happening in other markets and in the world. Check, what is economic data released in past days and what will release in coming days that can impact the market in which you want to trade. Try to avoid trading before data release because no one knows exactly how market will react on news.

Read More: How to Get Success and Become Millionaire with Forex Trading

5- Set Trade Entry and Exit Rules

Many traders lose money because they only pay attention on buying or selling but they don’t know where to enter in market and where to exit. And some traders fail to enter in trade at right time because they afraid from losing money.

Properly analyze the market and set entry and exit levels before putting a trade to get profit. Do your analysis to enter in market and don’t get personalized if trade goes negative because it’s part of trading. You can use our free forex signals to enter and exit from trade.

6- Money Management and Risk to Reward Ratio

Money management in trading is key step towards success. Select leverage wisely and never trade based on emotions. Your risk level depends on your trading style, percentage of risk that you can take and your strategy. Percentage of risk for one trading day may be different for every trader but it should remain in range from 1% to 4-5%. Always use stop loss while trading to avoid wipe out your account.

It means if you lose some amount of your capital you should stop trading for that day and take rest. Start trading again with new analysis and take winning trades.

7- Analyze Your Performance

Keep record of your trades and analyze to find out the reasons of losing trades to overcome mistakes. Many successful traders also keep their records of winning trades and analyze them how they win and why.

You should keep record of your trading history for every trading strategy/system like entry and exit price, stop loss and take profit, drawdown of each trade, daily open, close, high and low etc.

Bottom Line

Successful trading on demo account is not guarantee that you will get success on real account as well because emotions play important role in real trading. You trading plan should be based on well tested strategy and your trading style. Use proper risk to reward ratio and trade with money management.

Most Important: “Powerful trading plan will not help you to get success if you don’t follow it strictly”.

Keep in mind the following thing while developing a successful trading plan.

  • Skill assessment and practice
  • Capital for trading
  • Time you will give to your trading
  • Risk to reward ratio
  • Money management
  • Your trading style and tools
  • Rules for entry and exit from trades

Keep your trading plan in written form and past a copy of this in front of you within your trading area. Strictly follow your rules to get success in trading to achieve your goals.

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