Research has shown that one of the many reasons many new forex traders do not really make any decent progress or become successful is because they do not have any sort of forex trading plan. Many newbies typically jump into forex trading without any plans whatsoever. To make a forex trading plan, you need some critical elements that will help make it successful. These elements when put together will help make for a successful forex trading plan.
Having a forex trading plan is critical to your success. Unfortunately, many traders do not see it as something they must have. Instead, they see it somewhat of a mystery, something they can’t do, something they are incapable of or something they will eventually get around to doing. Unfortunately, most never get around to doing anything about it. In fact, many forex traders often say they don’t know how to make a forex trading plan that will be both effective and useful. This article is meant to address just that and turn things around.
Define Your Point of Entry
The first thing to do would be to define before hand, what point of entry is the best. The highest quality point of entry is often known as the Perfect A+ entry point. This point basically shows you that no matter the situation of the market, entering the trade at this point is going to be profitable for you no matter what. After ascertaining that point, also ascertain the lower quality point of entry. These points of entry aren’t as perfect as the first, but they can still get the job done properly even if with less profit and more risks.
Understand How Much Risk You Need to Take
This is known as the risk to reward ratio. You need to understand and know just how much risk you are willing to take to earn a certain amount of profits or how much you may have to lose to win big. This is essential because you have predetermined the risk level, you can be rest assured that no as long as the trade is still within your risk tolerance zone, you can still make some profits. The reasons this is good is that unlike other forex traders who typically pack it in when the market trend doesn’t favour them, you can stay longer in a trade until the market trends favour you. This way, you get to make a lot more than the average forex trader.
Have an Exit Strategy
The third thing you need is to have an exit strategy even before commencing a trade. So, just as you have an entry strategy, so you must have an exit strategy. This will help prevent you from getting greedy or losing too much money. With this, when you reach your profit target, you can exit the trade while it is best and not when you start haemorrhaging money