Developing your trading plan

You have just learned about trading and have tried endless hours on the demo system now your ready for the real deal. Before you do so, ask yourself what's the game plan?

New traders today fall into the sink of trading as per their emotions and not creating a plan or worse failing to stick to the ones created by them. Mistakes lead to irrationality, hastiness and emotional decision making which is considered a taboo in forex.

Let us brief you one why creating a game plan helps and how it affects you. By creating a trading plan it will help you understand your trading strategy based on your personality. A trading strategy serves as a blueprint when it comes to decision making and based on your design you would have already had an outcome in mind that just about anything may occur.

How does one create a plan? Let's explore together from start to finish, it is important that you keep a detailed log of your trading to help track the consistency of your trading plan and today we will guide you on how to create your first plan.

1. What Trader Are You - How Much Should You Trade

You begin by first determining what kind of trader you, based on the frequency of your trades and the duration over which your trades are done. If your style revolves around scalping and your strategy works within a 24-hour time frame chances are you're a day trader.

On another note, if your trading revolves the span of several days and likes to spend the week planning your horizon. This would strategy helps calculate the number of trades you should be based on your trading horizon of which you would add up all your winning over a set period and then multiply them.

2. Capitalize Your Opportunities

When you start limiting the number of your daily trades, you are also limiting your opportunities in the market. We aren't condemning it, by limiting the number of trades you make you should then be able to analyze the best trade setups which suit your trading plan. Few trades mean more time to analyze on making trades that count. Often quoted by leading experts of today.



3. Trade with reality

As a trader, we understand the highs and lows that come with trading. Tensions will run when things are not going your way. Fret not and do not let those emotions control or get the best of you. When you limit the number of trades you make a day, you are slowly eliminating "anger" trades which are bad trades that often happen after a loss. Stricken with grief and unable to succumb to the loss, new trades often have the urge to make up for their loss thus emotional trades generally lead to taking a higher risk as their only objective is to recoup the loss.

4. Play by the rules

Excited traders start off crazy about the movements of the currency they are pairing and often open trades based on instinct. We do not recommend this, as a fundamental to trade off as in most case it is often open positions made by traders who have little to no knowledge about. A trading plan must be able to clearly describe the signals you are looking for before opening the trade. It should include different parameters and that the indicators you are using must meet prior to entering the trade. Results will vary based on how detailed your plan is, a clearly defined entry rule will ensure your trading activities will remain disciplined.

5. Exit stage left

A guideline on exiting is just as important as the entry because this helps you understand predetermined exit signals at the same time maximizing your potential gains at the cost of minimizing the loses. An exit rule should be based on the maximum risk and potential profit of each trade.






6. Set Stop-Loss And Take Profit

Now that you know the importance of setting entry and exit rules, stop-loss and take-profit levels are next. It is crucial that you set a stop-loss level on every trade that you make in order to limit your potential losses one every trade. You should think this through ahead of time and should tie your stop loss to the percentage of your trading account that you are willing to risk.

Conclusion
We would like to close this by emphasizing once more on the importance of creating a trading plan. You could start by creating one today with our free Ausforex Demo trading account. Or get in touch with us today and ask about our trading plan and self-development programs available. Stop reading about great men and start being one today! Only at Ausforex.