When approaching the field of forex trading where personal decisions translate into profits or losses, having a well-outlined and easy-to-follow plan can make the difference between success and failure. Simply stated, a forex trading plan helps to keep you disciplined. Trading is a business and needs to be treated as such. Just as a business has standard operating procedure to keep things running smoothly, you have a trading plan to stay disciplined.
Having a trading plan before starting to trade is much like having a map before starting to travel. Trading in the forex without a trading plan, even if you have experience trading in a demo account, can be a challenging experience once real money is on the line. Basically, having a trading plan helps traders treat trading forex more like a business. Most people interested in forex trading already know that anyone running a business generally requires a business plan in order to have an organized basis from which to achieve greater success.
A trading plan in the forex market isn't really any different from any other plan you could imagine. It is an outline of your planned trading activities, something like a to-do list when it comes to trading forex online. The main idea of the trading plan is to develop a set of rules that you are going to adhere to and how you are going to implement them. Once you have the rules written, it is much easier to apply them as there is a clear plan of action on how they need to be followed.
Your trading plan should include a checklist that you follow; this will include things that you look for in the market and what you want to see before entering a trade. If you can tick all the boxes then you enter the trade, if not then you hold off until your trading edge appears again. You can actually formulate your whole trading plan as a checklist; this will make it a smooth format that allows you to quickly decide if any potential trade setup is worth taking.
The whole idea behind building a trading plan is for it to be read daily. This means keeping it to one page (two at the most) and hanging it somewhere that’s easily visible from your trading desk. Once you put your own trading plan together you must ensure that you actually use and follow it each time you interact with the market, this will work to reinforce positive trading habits like patience and discipline, and it is these habits that will make you money over the long-term.