Forex trading plan: Developing a Trading Plan

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Choose from standard, commissions, or DMA to get the right pricing model to fit your trading style and strategy. You might also want to think about setting a personal circuit breaker – for example, to stop you from trading if you reach a daily loss of 5%. The fast-moving nature of forex means that stops and limitsare highly recommended for every single trade.

A position trader buys and holds an investment long-term with the expectation that it will grow in value. Look at how much money you can afford to dedicate to trading. Trading involves plenty of risk, and you could end up losing all your trading capital . Any trading goal shouldn’t just be a simple statement, it should be specific, measurable, attainable, relevant and time-bound . For example, ‘I want to increase the value of my entire portfolio by 15% in the next 12 months’.

Open a live account with IG to start trading today, or open a demo account to practise in a risk-free environment. You don’t only have to include the technical details, such as the entry and exit points of the trade, but also the rationale behind your trading decisions and emotions. If you deviate from your plan, write down why you did it and what the outcome was. First, evaluate your expertise when it comes to asset classes and markets, and learn as much as you can about the one you want to trade. Then, consider when the market opens and closes, the volatility of the market, and how much you stand to lose or gain per point of movement in the price.

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Know exactly what a high probability trade looks like, and only take a trade when you see one. Winners focus on how much money they could lose as opposed to how much they can win. We’re always here to answer questions, resolve issues and ensure you get the most out of your account.

Trading platforms

Some traders choose to use fundamental analysis to assist with their trading decisions. News can be considered anything ranging from economic, political, or even environmental events. One of the core components of a trading plan is a trading journal, which is essentially a diary or record of your trading activity. This will, over time, highlight the areas where improvements can be made to help you become a better trader. Trading the dips and surges of ranging markets can be a consistent and rewarding strategy. Because traders are looking to capitalize on the current trend rather than predicting it, there is also less inherent risk.

When you lose money on a trade, it doesn’t necessarily mean that you did something wrong or that your approach was flawed. Although technical analysis can help you manage risk and reward and inform your trading decisions, no analysis can predict the future with 100 percent certainty. Rather than scrapping your strategy each time the market moves against you, practice smart money management and be consistent.


There are very few leading indicators available, which may give an idea of where the market is going to go. Fibonacci is the most popular, but most misused and misunderstood. If you’re targeting long-term returns and don’t want to dedicate too much time each day to opening and closing positions, for example, positionor swing tradingmay suit you well. Or if you are planning on trading full time but want to avoid paying overnight funding, you could consider day trading. The majority of traders use technical analysis in determining the expected market direction. When traders see an emerging pattern, there is a good chance that a lot of other people are also aware of it.

Test your knowledge

Increase your income and get compensated for your trading knowledge with ThinkInvest, putting you in control. Make sure you are ahead of every market move with our constantly updated economic calendar. We recommend you to visit our trading for beginners section for more articles on how to trade Forex and CFDs.

Most traders will only open a trade if the potential reward is at least twice their potential risk. This means that for every $1 risked, there should be an opportunity to make at least $2. Goals can be made in absolute dollar terms or as a percentage of your portfolio and should be periodically reassessed.

It takes time, effort, and research to develop an approach or methodology that works in financial markets. While there are never any guarantees of success, you have eliminated one major roadblock by creating a detailed trading plan. If you want to make a lot of trades a day, you’ll need more time. If you’re going long on assets that will mature over a significant period of time – and plan to use stops, limits and alerts to manage your risk – you may not need many hours a day.

Base equals the timeframe charts you spend the majority of your time, if you are not sure, this is the timeframe chart that you keep going back to. Short and long are the timeframe charts that you refer to confirming or denying what is happening in the base timeframe chart. A common mistake traders make is jumping around randomly between chart timeframes.

Readjust your trading plan

When the trade goes the wrong way or hits a profit target, they exit. They don’t get angry at the market or feel invincible after making a few good trades. Your system should be complicated enough to be effective, but simple enough to facilitate snap decisions. If you have 20 conditions that must be met and many are subjective, you will find it difficult to actually make trades.

A retracement refers to an instance when price reverses direction for a short time before continuing on in the direction of the dominant trend. Traders use technical analysis to identify potential retracements and distinguish them from reversals . Although using Fibonacci retracements can help you determine when to enter and exit a trade and what position to take, they should never be used in isolation.

Although volatile markets can be tempting, a good rule of thumb is to avoid risking more than 2% of your trading account balance on any single trade. Trading more than that would expose you to losses that are hard to recuperate. Join thousands of traders who choose a mobile-first broker for trading the markets. Deepen your knowledge of technical analysis indicators and hone your skills as a trader. Trading objectively with your plan in place will allow you to have more confidence and less emotional participation. Determine the amount of risk or reward you are willing to accept or take on each trade.

If you are not emotionally and psychologically ready to do battle in the market, take the day off—otherwise, you risk losing your shirt. This is almost guaranteed to happen if you are angry, preoccupied, or otherwise distracted from the task at hand. Knowing when to exit a trade is just as important as knowing when to enter the position.

For example, you might need to constantly watch your open positions, which can be tricky if you are holding trades overnight. You could address this weakness by sticking to day tradingor using notifications and alerts to keep track of trades without always watching your trading platform. Use the guide below to plan and write out a 9-step forex trading plan.

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