To trade forex, you need a strategy. But even if you have a strategy, you must first be able to create a plan in the context of which you can apply your strategy consistently over time to generate good results. In this article we’ll try to suggest a basic framework for a trading plan with a gradual, step-by step approach.
Consider Your Mental and Physical Status
You don’t need to trade every day. On some days your mental and physical status will not be optimal for the generation of good profits in trading. Before going on to the further stages of planning, you must make sure that your physical and psychological condition is suitable to deal with the stresses of a trading day. Only when you feel confident that you’re emotionally relaxed enough to withstand the pressures should you consider the next stages of your plan. Remember that capital is limited, but opportunities in the forex market are unlimited.
Read the News, Study the Day’s Schedule (Major News, Stick Market, Options, etc.
Before beginning to trade, it is a necessity that you consider the time schedule of all the major events in the day which were pre-announced. Not all surprise, and not every development can be predicted, of course, but it’s always a good idea to be up-to-date with the day’s schedule so that you will not be caught in the dark when some option traders, news releases, or press conferences suddenly derail market action.
Study the Charts
Clearly, a daily trading activity demands a careful study of the charts each day on a routine basis in order to identify opportunities and minimize risks. Charts should be studied about two hours before the opening of the New York market on different time-frames, and the trader must take note of every configuration that may offer profits on an hourly basis.
Decide Where to Stop
It’s a great idea to have some predefined goals for each day’s minimum profits or maximum losses. If either of those goals is reached, we stop trading to continue on an another day. This is just another application of the principle that tells us to let profits run, and to cut loses short. And it may also be helpful in reducing the emotional pressures of trading.
It is always better to seek the faults with ourselves first before blaming the market, or the broker. Those may or may be against the trader at times, but the trader has control over his decisions only, and he should therefore concentrate on improving his own skills, instead of finding things to complain about. Forex broker reviews can help you sift among the myriad choices in this field, but filtering the problems of your character and style is left up to you.