Forex Traders need a trading plan because it describes the kind of a trader they are. This helps focus on your trading objectives.
Because with a trading plan, you know exactly what to do, when to do it and what to expect from the market.
Like we said before, a trading plan is a guide line/road map to trading.
There is nothing more important than knowing exactly where you are going and what you are going to do there.
Having a plan helps you to know how you will get to where you are going. This makes trading easier and enjoyable.
Imagine yourself going for a trip with a GPS, you already know where to find all the important things that you may need for your journey.
This makes you feel confident and familiar with place even when you have never been there.
Why forex traders need a trading plan
1. A trading plan helps you to manage and spend your time profitably. You spend less time analyzing charts.
Because this becomes a routine in your trading, it gives you less stress to trade and you can schedule your time very well and feel at ease.
Since you already know what to do and how to do it, all you do is to trade only what the plan says.
2. It is only when you have a trading plan that you can take clear records and journal for your trading system.
The records will help you point out the common mistakes while trading and be able to improve them.
3. A trading plan also helps you to trade consistently.
When you write down rules to trade, you will find it hard to break them. Because that’s what you believe in, you will at least try to convince yourself that it is the wright thing to do.
As you do it over and over again, It becomes a habit. You now know what to do and how profitable your strategy is.
You also get familiar with the market, measure your strategy’s performance and become more confident to trade.
When you trade following a plan;
- You know when to enter a trade.
- How to cut your losses and when to exit.
- You can also constantly monitor your running trades and adjust to any market changes.
- You know when you can cut your losses; lock your profits and when you can close your trade.
- With that kind of assurance you can make trading profitable and very easy at the same time.
However, trading without a trading plan is like setting a trap for yourself.
Disadvantages of trading without a plan
- You may not be able to control your emotions especially when a trade goes against you.
- You start jumping on trades because you feel every opportunity is worth taking.
- Chasing after the market becomes a habit.
- Certainly, you hold wrong trades for long because after all you trade with no stops and scared of large losses.
- Your main focus of trade is to get profit, therefore you never consider the other side of loss
- You are likely to try out every strategy you learn of and none of the strategies works
- Setting a stop loss may not make sense for you after all the market can never stay in one direction. At the end of the you always close with large losses.
- You take long to make decisions because you don’t know what to do.
- You take a lot of trades because you are allover the market all the time. Unfortunately most of the trades are losses.
This kind of behavior may not to allow you hold your account even for a single day.
Failing to plan is planning to fail!
Don’t play with your hard earned money.
To a bigger extent, having a trading plan and following it to trade is not something easy to do for everyone. However, it is the only way to consistent profits. SO, you’ve got to give it your all.
It is never too late to turn things around for good. All the above should give you enough reasons to use a trading plan.
Plan and stick to your plan. Remember this ever day, if you fail to plan you are planning to fail.
Procrastination to trade is when your trading set up confirms and you hesitate to take trade. Or your trade show all failing signals and you hesitate to close trade to cut losses. Also, in cases, where you sometimes hesitate to take profit because you want to...
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