Building an FX Master Plan
All traders need to have a trading plan whether they are looking at the stock market or the forex market. There is no master plan that will have all traders being successful. However, each trader does have a master plan that will make them successful. These plans are linked to the FX trading personality of the individual. There are 8 steps you should follow to creating your master plan.
Assess Your FX Skills
The first step in your master plan is assessing your FX skills. You have to be honest and determine whether you are ready to trade or not. Does your trading strategy work and are you able to make a profit on a demo account. Can you identify technical signals and indicators? The biggest factor in being successful in trading is having all the right skills and being prepared.
Prepare Yourself Mentally
Forex trading is very demanding on your mind. You have to ensure you are ready emotionally, physically and mentally for trading each day. If you did not get a good night’s sleep then you may react slowly to situations and lose money on otherwise profitable trades. You need to be in a good trading zone everyday to make the most of the market.
Set Your Risk Level
The FX risk level is the amount of your trading account that you are willing to risk on a single trade. This should never be more than 5% of your account. In fact, new traders are advised to only risk 1% of their account. This is to stop your account being drained should you have a run of losing trades.
Set Realistic Goals
You need to have trading goals that are realistic. The trading goal should also relate to the trading strategy you are using. If you are scalping then you cannot expect the same goals per trade as a position trader. You should not only set goals per trade but also for the week, month, quarter and year.
Always Do Your Homework
Before you open a position you have to complete the necessary homework. This includes technical and fundamental analysis of the market. You should never open a trade unless you can back it up with the homework you have done. If you are going to do this then you will not be successful in the long run.
One thing that most traders do not think about is their hardware. Before you start trading you should reboot your computer, clear the temporary memory and make sure your internet connection is stable. There are small things that make the computer run better and ensure your trading software does not freeze halfway through an important trade.
Set Your Exits
Most traders spend the majority of their time looking at the entry points for their trade and often neglect the exit positions. You have to have clear entry and exit points before you open a trade. Not knowing when you should exit can lead to taking profits too soon or turning a winning trade into a losing one.
Keep Good Records
You need to keep a record of everything you do when FX trading. This includes what technical analysis you do and all the parameters of your trades. This makes it easy to review all of your trades later on.