If you trade forex, you need a trading plan if you wish to become a consistent winner and to be able to make trading decisions fast and accurately.
Here are the most important tips a forex trader can use to develop a trading plan:
1. Are You A Day Trader Or A Swing Trader, or How Often Are You Going To Trade?
The day trader will benefit by trading the short and sometimes almost instantaneous trade signals that bring in profits. Your trading plan will need to either concentrate on momentum or on recognition of price patterns that recur within short time frames. Many day traders trade on price levels, fibonacci or retracements only- without indicators. If you are a swing trader, your trading system will involve trading signals over a longer period, and may involve indicators such as bollinger bands, price levels, longer term momentum, overbought and oversold indicators such as stochastics and so on. The most important thing is your system must be built around your trading profile- and what type of trader you are.
2. What Amount of Risk Are You Going To Tolerate.
Your trading plan will include a trigger that will automatically set in to cut your losses short if the trade goes against you. What amount of risk or losses are you going to tolerate before you cut loss?
2. How much Gains or Profits Are You Aiming For?
A gain is a gain irrespective of its quantum, and where there are no commissions involved in trading, the smallest gain represents a profit. Is…