Making a Plan and Sticking to it

Filed under: Learn Forex Trading |

 

For today’s forex related article, I would like to talk a little about how important it is to have a clear trading plan, and then to stick to it.

 

In today’s live trade report, I talked a little about a trade opportunity that I saw but did not act on. The setup had all the elements that I have written down in my trading plan, but because I have been experiencing something of a drawdown recently, I did not take the setup, as I was too concerned with protecting my bank. Had I taken the trade, I would have made a very nice 2.5% rise on my bank in a very short space of time.

 

A trading plan should include all of the necessary elements for being a profitable trader, such as good money management (such as never risking more than 2% of your bank on a single trade), risk-reward (such as always having a target of at least two times your risk), and entry an exit methods (such as price action signals and respecting support/resistance levels). Once you have got all of these elements together and tested it over a reasonable amount of data, you should stick to your plan. Of course, your rules can be tweaked and modified as you get more data to analyze, but generally, you should stick to your plan as trading naturally has ups and downs with regards to your equity curve.

 

If I had done as I am preaching, my trading bank would be 2.5% higher than it is right now. As it is, I missed the trade and sat on the sidelines watching a perfectly good trade setup. So make a plan, test it, and then stick to it. It’s easier said than done, but with practice, we can get there.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>