How to Write a Forex Trading Plan
Forex trading plans are a complete guide to what traders will do on the market. This plan must include clear rules for entering and leaving the market, money management rules, and also outlines time frames, trading instruments. This must be made before starting Forex trading.
Forex trading plans consist of:
1. Style of Forex trading.
Define what type you are as a trader: scalper, day trader, swing trader, or position trader. For example, scalper traders execute large amounts in short periods and target profits in a few pips, while swing traders keep transactions from a few days to weeks.
2. Trading USD Forex Pair.
There are many major pair currency instruments that can be chosen such as: USD JPY, AUD USD, EUR USD, GBP USD, USD CHF, USD CAD, and NZD USD. Each instrument has the characteristics and conditions of each trade. For beginners it is recommended to choose 4-5 Forex trading instruments and study them in depth.
3. Signals to enter the market.
Analyze the current market situation. You can do this by using a technical analysis tool: CCI, MACD histogram or Stochastic Oscillator, support and resistance levels, chart patterns, etc. Whatever Forex trading strategy traders are using, signal reliability needs to be ensured. Analyze fundamental data and assess its impact on the currency. Monitor news on the economic calendar. It is not recommended to open a transaction 30 minutes before and 30 minutes after the news release.
The easiest way is to follow the current trend. What is
meant by a trend of movement that shows in which direction the exchange rate or
price moves in the market in the form of a graph. The direction of the trend
itself is twofold, namely upward or downtrend or downtrend.
4. Signals to exit the Forex market.
Determine when you will close the position. It is important
to have a definite strategy, based on when you will be out of the market.
when you should close the position as follows: `
- Has reached Stop loss
- If you feel the profit you get has reached the target
- Trailing from your stop loss is touched
- Close your position if the loss is too much, this is to prevent the loss from increasing
- Close position when you see an entry of a trading signal that is opposite to the position you are currently opening
5. Stop Loss and Take Profit levels.
This command helps traders limit losses and set profits on sharp market movements. To limit losses, determine the amount you are willing to bear and put Stop Loss. The recommended risk level must be 2-3% of trading capital for each transaction. Take Profit is used to set profit. The standard loss / profit ratio is 1: 3. The potential profit must be several times more than the risk.
6. Analysis of Forex trading transactions.
Analyze closed transactions, record the results, and correct errors. In this way, you can improve your trading strategy.
7. Targeted Forex Trading Income.
Write down what you want to achieve on Forex. The target must be clear and achievable. Try to achieve ideal transactions written in your trading system.
The Forex trading plan must meet your requirements and strategies, and include certain things that need to be corrected from time to time. Plan your trading and follow the trading plan. For more efficient and profitable trading, brokers provide analytics. The Forex Analytics section consists of market reviews, technical analysis, market news, economic calendar, and daily forecasts, where major currency analysis is published.
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