The foreign exchange market has only recently become widely available to retail traders after the introduction of online forex brokers. These days just about anyone with a modest cash deposit, a computer and an internet connection can get involved in trading currencies. However, just because it is very easy this days to get involved in trading forex, that is no guaranty for anyone to succeed without having a good forex trading plan.
In order to be successful over the long term in managing emotions, a forex trader generally requires an objective trading plan with set trading rules and objectives that will produce consistent profits without incurring excessive draw downs. In addition, the trader has to cultivate a successful trading mindset that will include the discipline to stick to their trading plan once they have decided to implement it.
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.
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. Furthermore, the objectivity and clarity that a good trading plan provides can be a real boon when needing to make quick trading decisions to take advantage of opportunities that may arise in the often fast moving forex market.
The hardest part about writing your forex trading plan isn’t defining your rules. In fact once you start writing it you’ll find that the various rules fall into place quite easily. The hard part is including enough detail for it to be effective yet being concise enough so that you’ll actually use it. 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 is easily visible from your trading desk.