Having a solid Forex Trading Plan is a crucial part of Forex Trading to become the consistently profitable trader in Forex Market. It should contain all essential components of the trading plan.
Components of the Trading Plan
- Trading Strategy/ Method / System
- Money Management Rules
- Trading Goals
- Traders Weaknesses
- Rules of Trading
- Routine of a Trader
Trading Strategy/ Method / System
The Currency Pairs:
Write down the names of the Currency Pairs, according to your trading strategy/ method/system. The following Currency Pairs, I use for trading:-
EUR/USD, GBP/USD, EUR/GBP, AUD/USD, NZD/USD, USD/CAD, USD/JPY, USDCHF, EUR/JPY, EUR/AUD, GBPJPY, and AUDJPY.
Mentioned your time frame according to your trading strategy/system/method. Most Price Action Traders use 3, 4, 6, 8 & 12 Hours & daily time frames to execute trades in Forex Market.
Type of Analysis:
What kind of analysis you want to use in your trading must mention. I execute trades in market with the help of Candlestick analysis along with Support and Resistance areas
I use no Indicator in my trading method (if you use them). So mention them in your trading plan, i.e., MACD, RSI.
Money Management Rules
Risk Reward Ratio:
Note down your Risk Reward Ratio according to your trading strategy. Expert Traders prefer to use 1:2 Risk Reward Reward Ratio which required low maintenance.
Risk Per Trade:
Risk per traded is recommend 1 to 4 percent, it depends on your Money Management Rules and trading strategy.
In this part of Trading Plan mention your minimum and maximum target per trade.
Stop loss must use in your trading without stop loss and trade profit trading become gambling. Therefore, mentioned minimum and maximum stop loss as per your money management rules.
You trading goals must make realistic. I want to become the rich is not a realistic goal. Therefore, you can write your goals in the following ways.
Short-Term Trading Goals:
To make consistent profits each month and my monthly income more than my job.
Long-Term Trading Goals:
To grow my trading account up to $25,000 with using my Price Action Trading Strategy, to follow my trading plan whenever I execute the trade in a market.
I tend to get angry after bad trades and try to trade revenge on the market.
When I make pips so, I want to earn more and more pips which case to overtrading
Rules of Trading
If I lose three trades consistently, therefore, I will take a break for a week. Thus, to come back for trading with a fresh and bright mind and avoid losing streaks.
My target a maximum of 100 pips per week. If I am open trade and it goes over the 100 pips target I can keep it open and trade it as it would usually close. I have achieved 100 pips. Therefore, I give up trading for this week.
Routine of a Trader
My trading week starts Sunday before the opening of the market, so I spend about one hour doing all my analysis and planning of the trading for the coming week. Monday to Friday I should trading full time and observe the charts very carefully. It is optimal trading time.