A trading plan is a collection of rules used to explain trading activities. It can be a very useful tool in assisting you to plan and execute your entire trading strategy.
There is no one-size-fits-all trading technique; each trader is unique, and different sorts suit different people. However, there are several universally agreed components to consider while developing your own strategy.
Writing a trading plan is a vital step toward becoming a successful Forex trader. A trading plan's goal is to help you commit to trading guidelines so that your emotions are not affected.
You are more prone to make trading mistakes, over-trade, or make impulsive actions in volatile markets if you do not keep a trading notebook. Here are ten checklists to consider while developing a trading plan.
10 Steps to Creating a Trading Plan
- Choose which currency pairs to concentrate on.
- Keep an eye out for big news releases.
- Choose your preferred timeframe.
- Examine the market to see if it is in a trend or a range.
- Determine the areas of support and resistance.
- Based on your plan, determine if you want a short or long setup.
- Stay out if the strategy rules do not fit.
- Execute if the strategy rules are met.
- Determine the strategy's entry and exit prices.
- Calculate lot size based on a 2% risk.
Summary
The key to success is to stick to your trading plan on a daily basis. If the deal does not match all of the trading conditions, pass on it. Follow the rules rather than your instincts. You are not permitted to engage in a trade based on your emotions. This is a huge step forward in terms of maintaining consistency on your forex trading route and avoiding emotional trading.