Now let’s continue our Journey from ZERO TO HERO I mean to become a profitable Trader. Before we have talk about TRADING PSYCHOLOGY if you haven’t read it yet you can check out my profile for it, now let’s continue to one of the basic and one of the most important thing in trading which is creating your own unique TRADING PLAN. In creating your own trading plan you should always make it simple and precise that you can follow it easily. Remember that a Trading plan is always accompanied by the Trader’s discipline to follow and stick to the rules.
Trading Plan should answer the questions why, how and when. It also includes your emotions and Trading System. Don’t be confused between a Trading Plan and a Trading System, they differ from another but hence a Trading Plan should include a Trading System. One of the importance of a Trading Plan is it would help you survive or let you protect your capital being wipe-out as long as you are following your plan. It also guides you on when to Trade or not, it somehow filter the Bad Results from your Expectations. Your Trading Plan is somehow your EDGE in this forex world it is somehow your weapon in survival and success.
Trading Plan includes a well balanced and determined set of Goals . What should a good goal consist of? A goal should be SMART which stands for S-Specific, M-Measurable, A-attainable, R-Realistic and T-Time bound. These are the major characteristic/component of a good goal. Your Goals will determine your Expectations, whether you want to gain 10%per month, or double your account per year however the higher your expected gains the higher your drawdown/risk exposure on your trades.
Your trading plan should also provide you with a good consideration regarding your time allotment. People should also consider their job if they have one or if they have daily routines that are necessary to be done. It affects your trading capabilities especially when analyzing market. Eventually people who have job of 7-5 are exhausted and stressful which somehow have a detrimental effects on the trades that have been created. Trading sometimes becomes too addictive that it affects our daily lives. Knowing that this could have negative effect we could try to used a larger time frame in analyzing the market hence provides us the less time and effort in watching over the trades.
How much is your Risk Capital? Why do I call it risk capital because it is the money you should afford to lose. You should never put money in forex knowing that it may be wipeout in just a couple of minutes. You should consider your capital as your bullets in trading because the higher the capital the higher the probability that you succeed especially using very low leverage. You should never risk more than 1% of your account per trade. If you cannot raise a good capital in trading do not worry there is still demo trade that you could practice until you are well capitalized.
In trading we all also need Information/data that could affect the way we trade. Knowing that the market is also affected by the News Events occurring in every corner of the globe we should also include in our plan whether or not we trade the news or not or it create bias in trading. For example interest rates announcement sometimes create market volatility which may be good or bad to our position, we may also create bias because of interest rate swap which would create an additional edge in our trading capabilities.
Finally we need to choose a forex tools/application/broker/ in trading where we could analyze the charts or execute the trades. With regards to online charting I recommend for newbie to stick to your broker charts because sometimes there is discrepancies form broker to broker. If you ever see EA for sale that can make you huge money think twice, why would an individual sale something that can make him a millionare/billionare there is no such thing don’t ever believe them. With regards to brokers choose regulated ones for your protection, beware of huge promotion bonus you don’t need it if you know how to trade well, trade on a capitalized broker to minimize risk for bankruptcy and for higher insurance benefits choose a well known banks to execute your trades for you.
Generally there are so many things that you need to consider in creating your own trading plan, this is just a small overview of how your trading plan would be composed with. Never copy other trading plan because it may not be suitable with your personality, emotion, lifestyle, capital, money management. Be who you are make your own and be proud of it. With your own Trading Plan you could know if you could succeed or not. Like engineers and Architects they need to create a building Plan before they build the building hence as a Trader we need to build our Trading plan Before building our Trading System which is the backbone/framework of our success in the future.
"Most people don't plan to fail; they fail to plan." - John L. Beckley