5 Action Steps for the Perfect Trading Plan
Monday, January 29, 2018, 12:00 PM | Leave Comment
Forex is very much like traveling to another country. You exchange your currency for theirs, and then you can make a profit out of what’s left over when you return. However, this becomes a lot more complex when you think of it on a larger scale.
Just a few euros or dollars don’t make a difference, but financial actions of the rank of millions do.
If you’re just starting out in the field, then you’re most likely aiming to be as good as famous professional foreign exchange traders someday.
To achieve this, you need to know of the bat that they all have one important thing in common: a well thought out plan. Other similar traits they all share is a taste for risk-taking and a strong sense of self-confidence.
Image Source: Pexels.com
The Steps
There are many variables in coming up with a strategy that is just right for you. Yet, there are some things everyone should know when it comes to foreign exchange. After all, there is a method to the madness. Here are five actionable steps to help you come up with the perfect trading plan.
-
Prepare Your Resources
It’s understandable that you’d want to start right away, but it’s important to take your time to prepare for the exchange market. Go through a thorough trading platform comparison to choose the best system and start setting your levels and alerts. In the case of the former, minor and major ones for support resistance need to be labeled properly.
As for the latter, entry and exit cues should be properly signaled to you by your program of choice. Make sure that your work area is organized properly so that there’s nothing to distract you from your objectives. You are doing business, after all. And, last but not least, don’t forget to prepare mentally. Being in the right mindset is crucial when you’re moving money around.
-
Set Risks and Goals
You must always have a clear-set target when you start trading. On top of that, it’s essential to calculate your risk to reward ratio adequately before jumping in. This term is very common in the financial sector, and it’s easier to calculate than you think. Simply put into perspective the amount of money you are investing with the potential gains.
You need to be knowledgeable about the market when making such predictions. However, don’t be afraid to take risks either. George Soros, one of the most famous forex traders in the world, took a huge leap in 1992 by short-selling ten billion pounds, but this brought him a one-billion profit. Such stories would never be told if they didn’t go against the odds.
-
Set Entry and Exit Rules
Entering a transaction seems like a big deal to most beginners, but it actually shouldn’t be. If it feels right, then you should go for it, it’s that simple. Assess the situation objectively. This is why the best traders in New York nowadays are computers: they don’t let overthinking or emotions get in their way.
Knowing when to exit is far more important. If you’ve already taken a hit in your stop and you are down, selling won’t seem like a good idea. And to top it all off, the market is unpredictable sometimes. For example, no one believed that an event with such an extended global impact like Brexit would happen in 2017. But it did, and the pound sterling depreciated instantly.
If you suffer a loss, don’t be too hard on yourself. It happens to the best of us. The important thing is for you to set a profit target for your actions and stop immediately once you’ve reached it. This will motivate you not to overstay your welcome and it will also ensure that you end up making a profit no matter what.
-
Keep a Record
Writing down everything you do is important if you want to evolve. Keep detailed records of both your wins and your losses, as well as all the steps you took that lead you there. By doing this thoroughly, you will be able to identify which strategies worked best for you and due to which factors. Thus, when the time is right again, you will know how to proceed.
-
Learn from Your Mistakes
Identifying your errors will help you to not repeat them again. And sometimes, it takes a really big one to open your eyes, but it happened to the best of them. Bill Lipschutz, the renowned forex trader which the industry refers to as the “Sultan of Currencies”, has made his fair share of mistakes.
When he started out, he turned a 12,000-dollar inheritance into 250,000 dollars just like that. But then he lost it all. However, this taught him an important lesson about risk management which is still relevant today: always think things through and don’t enter exchanges on a whim. Thanks to this, today he is one of the most successful people in the field.
Conclusion
The perfect plan when it comes to forex trading revolves around effective organization, calculated risk taking and a complete understanding of the exchange market. The way in which you apply these will vary depending on the global context, but one thing remains universal: knowledge is power, so use it well.
Throw us a like at Facebook.com/doable.finance
