November 10, 2009
How to Build a Rock Solid Forex Trading Plan
As a business, trading is your ticket to wealth and success. Trading with real money without a rock solid education in forex causes many traders to lose their accounts very quickly. A lot of traders view trading as if they are in a Las Vegas casino playing with cards and dices. Some may have gotten lucky, but they eventually lose in the long run.
The trader who has a winning trading plan earns the cash consistently. This will give anybody who wants to trade the idea on how important it is to have a trading plan. Sure, it does not mean that you will never lose while trading, that’s tough to guarantee, but you can move away from doing the same mistakes other traders make.
Having an attainable business plan is not only good for forex trading but it goes with all types of businesses. Without a business plan, your business will absolutely fail. So here are some tips that will help you build a trading plan which can aid you to do well and even succeed in forex trading.
Make your homework: Know the ins and outs of a forex trading account. Call your broker and open a demo account. Let your broker clarify things that you do not understand. Open a trade and see what usually occurs in a demo account.
What should be my targets before going live? Before you start trading, write down your target number of PIPS, your win to loss ratio, risk to reward ratio and other achievable profit targets. Before trading with real money, create an objective for your own good just to make sure that you are confident enough to trade with real money.
How many times shall I enter a trade? Knowing this beforehand is a must and for you to figure that out, check your charts and see where entries and exits happened previously and take note of the time interval between the entry and exit.
How big should be my starting capital? Whether it is $300, $5000 or $100,000, the important thing is that you know how to trade. Basically, it is alright to start with just a small capital but as you learn more and more daily, you can also increase that capital especially if you are confident enough with your trading skills.
How much should I risk per trade? Your risk must be based on the number of PIPS in your stop loss and not the amount of your deposit. The recommended industry standard for maximum risk in a trade is only 2%. But take note that that number is based on your win to loss ratio with your risk to reward ratio.
You must exert a lot of effort in order to achieve success in any business. For your forex trading business, be sure that you are well familiar with every aspect of the trading business. And if you do have a solid and attainable trading plan, you are indeed on your way to consistent inflow of profit.
Filed under Forex Trading Lifestyle, Global Economics: Forex News and Fundamentals by Natasha Silverman
Comments on How to Build a Rock Solid Forex Trading Plan »
Forex Trading is indeed a great way to earn money without having to sit in an office cubicle.
But you practically need a lot of patience to learn how.
Great post Natasha!
it seems really complicated.
Do people really succeed in trading? And what if they lose all that money?
It is but with proper knowledge and training, it won't be that complicated. And you won't lose any money if you first learn how to trade in a demo account before trading with real money.