Anyone can potentially make money, and everyone can lose money. It really just depends on how in-depth you want to be.
How many of you got any kind of joy being called by your first and last name by your parents when you were younger? Why was I in trouble? Because I broke a rule. Your trading plan should consist of when and how you trade as well as what you do before and after a trade. The difficult part is writing the plan in as much detail as possible while keeping it as concise as possible, preferably to a single page.
Lastly, a Forex trading plan needs to be revised as your trading skills improve. Simply stated, a Forex trading plan helps to keep you disciplined. Trading is a business and needs to be treated as such. Just as a business has standard operating procedure to keep things running smoothly, you have a trading plan to stay disciplined. As previously mentioned, the Forex market is a limitless environment without many rules. A successful experiment always involves one control and multiple variables by which the control can be tested against.
Your Forex trading plan becomes the control by which you test variables entry and exit methods, various price action patterns, etc. Every winning Forex trading plan starts with a well-defined trading strategy, or strategies. Every topic below will reflect what you enter here in some way. For me this topic includes the pin bar trading strategy as well as the inside bar trading strategy.
Does a market have to be trending or can it be range-bound? Does the pin bar have to occur at a support or resistance level or will you also consider trading continuation pin bars? This one is straight forward but also crucially important. I had no idea what I was looking for, but I was determined to make sure each time frame looked favorable.
Look for setups on these time frames, trade on these time frames and exit on these time frames. As part of your Forex trading plan, you will want to define the currency pairs that you will trade.
Much like your trading plan as a whole, your watch list will change over time. I usually recommend someone start with about 10 currency pairs to watch at any given time.
As your trading skills improve and your confidence grows, you can expand this list to include other pairs and even some commodities. My watch list currently contains about 25 instruments that on average give me one or two solid trade setups each week. Although I do highly recommend it!
Mental preparation is without a doubt the most commonly omitted topic in a trading plan. Whatever the case may be, this one is a must! How do you feel today? Are you feeling energetic, sluggish or somewhere in the middle? These are all questions that need to be asked as part of your trading plan. Whether it was a late night with friends, the stresses of life keeping you up at night or maybe you just woke up on the wrong side of the bed. These mornings happen to the best of us and they will continue to happen.
If not it may be best to sit this one out. A much more effective approach is to define your level of risk as a monetary value. But let me stop you there. Here is how I go about defining my risk as part of my trading plan. But at what dollar amount risked do you start to feel a little anxious?
In other words how much money are you prepared to lose on one trade? Anything over that and your emotions may start to get the best of you. So which do you choose? Of course these numbers will change as your account grows.
But just be sure to always define both money risked and percentage risked as part of your Forex trading plan. Your R-multiple is simply your risk to reward ratio stated as a single number. In other words the risk is half the potential reward. When we divide by 50 we get 3. I personally use 2R as a minimum so that I know my risk is never greater than half the potential reward. Of course the higher the R-multiple the better so no need to set a maximum value here.
How will you enter the trading strategies that you previously defined in your trading plan? For example if one of your trading strategies is the pin bar, what entry method will you use? What market conditions need to be present to justify entering on a break of the nose of the pin bar?
Ohh, where to begin? Let me restate that by saying that most traders are excellent at finding one possible exit — the profit target. Everyone loves to see how much money they stand to make on any given trade. Will you exit the full position at the first target? Or will you exit half of your position and keep the other half on the table?
Establishing rules for how you manage risk is an essential part of every good trading plan. Although you have already established where you will place your initial stop loss, you will also want to outline how you plan to trail your stop loss, if at all.
The topic of risk management is what makes or breaks a trader. What you do after a trade is just as important, if not more so, than how you mentally prepare before a trade. Also I like the affirmation. Saying what I want out loud will help it come true. Great start to , Thanks Nial Filo. I am nearly there What you say is just about what I am doing now.
Great lesson Nial thanks mate. Your email address will not be published. Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Learn To Trade The Market Pty Ltd, it's employees, directors or fellow members.
Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose.
No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. Forex, Futures, and Options trading has large potential rewards, but also large potential risks.
The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice.
We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.
Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Components of a Forex trading plan: I will give you examples of each of these in the section that follows: An example Forex trading plan: To avoid over trading, be patient, remain disciplined and stick to my plan always. This is the process I will use to scan the markets for potential price action trade setups: So, in your trading plan you might have a picture like this or similar to remind you of what you generally should look for: Checkout Nial's Professional Trading Course here.
Thanks heaps Nial Reply. Towfs November 24, at 4: Thank you Sir Nial for this Article , this is a very big help for me …. Coleen June 24, at 2: This was very helpful in creating my trading action plan. Luca June 22, at 2: Geetha June 9, at Thanks for guiding us sir, it may be too late for me finding this article, but surely obey ur instructions sir Reply. Kelsey May 11, at 5: Gedas April 18, at 8: Nial, I bring you results!
Leon April 10, at 5: Thank you so much I will built my trading plan. Ivan Sonavia October 8, at 2: I like this post. Thanks for sharing Reply. I cant tell you well enough how your articles have improved my trading. Thanks so much and soon ill join you i the members area. Adam May 12, at 7: Bruce April 9, at 9: I am revising my plan in light of this article.
Sheila April 8, at 9: Thanks Nial, you have made everything so Mich clearer and simpler with this article!
Gurpal January 25, at Hi Nial, Hope you are well. Thank you for another fantastic and priceless lesson. Thank you for all your help Thanks and Regards Gurpal Reply. Norah January 14, at A truly super New Year gift thanks a million Reply.
Michael January 11, at Raj January 9, at 8: Brilliant, this will help me a lot, thanks Nial Reply. Denis Cogo January 8, at Michael January 8, at Hi Nial thanks for your help as always Reply. Again, how often should trading plans be changed Regards, sodiase Reply. Robert January 7, at 6: Grace Muthua January 7, at 5: Chuka January 7, at 4: Adewole Samuel January 7, at 4: You are my mentor infact God sent angel pls dont stop posting your lesson to me so helpful thanks Reply.
Adewole Samuel January 7, at 3: I considered myself an ingrate if i refuse to let you know that you are my mentor pls l want you to coach me but currently am not financial sound to pay for your course llove you so much thanks alot Reply.
Trading plan are really important to follow Timely lesson for me. Taffy January 7, at 2: Nial, This is a superb offering to your trading community. Bruce January 7, at This article has prompted a review of procedures. Larry Hawkins January 7, at 8: Thanks Nail for new year Gift, God bless u.
Jonah January 7, at 4: January 7, at 3: It is a lot simplier than I thought. Kennedy January 7, at 1: Hi Nial, That is an excellent article. Kind Regards, Kennedy, Nairobi Reply.
Terry January 7, at 1: Clear, concise and to the point without being overly complex. Flash January 7, at Thank you for your effort, and well constructed with clarity! Ampurira Grace January 6, at Sofia January 6, at Another example of an article that compels one to comment on its brilliance.
January 6, at 9: Seun January 6, at 9: Nial u are simply a forex guru, all ur lessons have made me a better trader. Thank u very much Reply. Ramli ms January 6, at 8: