Trading Plan

A good trading plan is important in your trading business. Here are the reasons why you need to have a trading plan:

Reason # 1: A Trading Plan can help you trade in the right direction.

Uniformity is a characteristic that you need to have in your daily trading routine, since this can allow you to really measure your success.

You can never know if you have a good system if you keep on breaking your own rules. While having a trading plan you can keep on focus with the things that you need to do.

Read your plan everyday so you won't forget your goals and impose discipline to yourself by sticking to your plan.

Reason # 2: All successful business has plans and trading is a business.

In real life you will never see a successful business without a plan. It is true that everybody can make money out of Forex trading, but you know what separates successful traders from one time big time traders? It's the plan that successful traders have.

You can't depend on luck to make your trading a success. A plan gives you a sense of direction and a something to think about regarding your trading business.

After you are convinced that you need a trading plan, you need to understand now what must be in your trading plan.

1. Trading System

This system is the core of your trading plan. Your trading system should be well back tested; you should have at least tried this system for two months for demonstration.

In your system you should include the following: your criteria for entry and exit points, the number of lots you trade, the amount of risk you take with every trade, currency pairs you trade and the time frames that you use.

2. Trading Routine

This part of your trading plan is the most critical part, it will identify three very significant factors: the time that you will analyze the Forex market as well as the plan of your trades, the time that you have to evaluate all your actions during the day of your trading and the time that you will actually keep an eye on the market to make the trades.

3. Mindset

Keep your mind steady and focused. At the same time keep your emotions away from your trading. In this part of the plan you will describe the state of mind you are into.

4. Weaknesses

In this section state all your weaknesses. You don't have to talk about your weaknesses but you have to work on them. Identifying all your weaknesses and being able to do something about it will make you a better trader.

5. Goals

Before writing down your goals, you have to think this over. Think and know for yourself what you would really like to accomplish. Picture in your mind what you would like to achieve. Set your goals as your motivation as well.

Keep you eyes on your goals.

6. Trading Journal

Everyday keep a log book about your trades. Write all the decisions that you made and why you made them. At the end of the day read through your journals and look back at the errors and the right things that you have done.