Understanding forex trading plan and how to create it. Now that you have learned the basics of Forex, you may start to wonder how to create a trading plan. As you learn Forex, it’s no doubt that you will find a lot of articles suggest you to develop your own trading plan in order to get the most of your trading. This is because someone else’s successful trading plan don’t always work for you.

Then, what should we do at this point? For sure, you need to make your own trading plan based on your situation, market experience, risk tolerance levels and any other indicators. You need a solid trading plan to go well in the tough Forex market. But, how can you make one that can make sure your profit opportunity? Keep reading to discover more!

What Is Trading Plan?

Before anything else, of course you need to know what trading plan is first. Traditionally, a trading plan describes what are supposed to be done, when, how and why. It usually covers a trader’s personality, risk management rules, trading system and also personal expectations. A trading plan is supposed to help a trader minimize trading mistakes as well as limit losses. 

#1 Trading Plan Is Different to Trading System

It is important for you to know that trading plan is different to trading system. A trading system identifies how you are going to enter and exit trades. And we should note that trading system is supposed to be one of the elements in trading plan. In this case, a trader may need two or even more trading systems within his or her trading plan. 

#2 Why Do Traders Need a Trading Plan?

Then, how should a trader have a trading plan in the first place? Generally, a trading plan is the one that can make trading simpler compared to trading without one. It is the one that can lead you to the right direction as well. Without a trading plan, you will just be a gambler in the Forex market. And gambling is for sure not trading. 

How to Create Your Own Trading Plan

You learn Forex and now how can you use anything you have learned to make a trading plan? There are actually some important things to focus on when you are designing a trading plan. You may need to assess your skill first before you start to work on your trading plan. Some mental preparation may be needed. And here are the other things to do.

#1 Set Your Risk Level

One of the important things to remember when creating a trading plan is to set your risk level. When trading, it is better for you to set a risk level which you feel comfortable with. For your information, professional traders are likely to risk no more than anywhere around one to five percent of their capital. You can set it based on your risk tolerance. 

#2 Set Your Goals

Of course, you need to set your own goals too. Set your goals in case of realistic targets of profits and risk/reward ratio. For suggestion, it is a good idea for you to set your goal weekly, monthly and also annually. Then, don’t forget to assess the goals in regular basis as well to see if you are still on track. 

#3 Record Everything

The last but not least, you should keep a record of everything to help you examine how effective your trading strategy is. Moreover, it can help you to highlight where you did wrong in case you experience a time of losing trades. Key information like entry and exit price, position size, stop-loss and take-profit loss are best to keep on your record.