How to make a trading plan for a trader?

A Forex trading plan is no different from any other plan you can imagine. If you want to start trading and you don't have any prior preparation, your success may be temporary, or worse, you may lose your investment. This is why a trading plan is so important to set your goals and how to achieve them.
Every experienced trader has a well-researched trading plan. In fact, it doesn't matter if you are an experienced trader or a beginner, a Forex plan can help you become a successful trader.

What is a trading plan?

This is an overview of your planned trading activity based on the parameters you have selected. Or, in other words, a list of tasks you have compiled to work more effectively in trading.

What is a trading plan for?

The main idea of a trading plan is to develop a set of rules that must be followed. Once you write these rules, they will be much easier to apply because you will have a clear plan of action for trading.
An effective trading plan can help you better analyze the Forex market and successfully apply your trading strategy. A Forex trading plan can prevent spontaneous and irreversible decision making, which is especially helpful when emotions start to show.

A trading plan helps you avoid trading mistakes and allows you to evaluate your profits and losses. The purpose of a trading plan is to make you think before you act, and thus prepare for trading sessions.
Determining the instrument you want to trade as well as your goals will help you know which operation to perform during a trading session, depending on the scenarios that arise.
For example, if a trader is in a winning position before a major economic release, a trading plan will let you know exactly whether it is best to let the position run or close it to avoid a sudden move triggered by some economic announcement.

Because the trading decisions you make are part of a trading plan and have a predetermined goal, having a structure that defines the rules to follow and eliminates any subjectivity in your trading activity allows you to better manage your emotions.
Another good reason to limit the number of trades is that without a CFD trading plan, traders can make hasty trading decisions, and those decisions are likely to result in losses that the trader will try to offset with more trades, even high volume. Which carries an even higher level of risk.
This is often done with more volume than was used for previous positions, which creates a higher level of risk. This is exactly what causes the vast majority of traders to lose money in the foreign exchange market.

An effective trading plan contributes to the stability of a trading account in the long run. If you choose to open a position with a risk greater than 1% of your equity, incorporating that risk into your trading plan will help you manage other open positions.

A good trading plan contains:

• Clear description of entry signals
• Detailed description of exit signals
• Maximum number of transactions per day/week/month
• List of trading instruments
• Hours dedicated to trading
• Maximum transaction duration
• Minimum transaction duration
• Thoughtful trading goals are specific, measurable, achievable goals based on the experience of the trader.
• Trading chart analysis method that includes strategy details with exact trade entry and exit points.

Traders can develop discipline by creating a list of their own rules to follow. The same goes for market analysis: a trader should write down their analysis method in a trading plan to check if it follows it.

When trading Forex online, following a plan is extremely important.
The simple truth is that traders can never be 100% sure what will happen in the market.
Forex and CFD traders do not have the gift of clairvoyance. Our first piece of advice is to always approach trading with probabilities and understand that trading is not a predetermined process.

Fear of the unpredictable can be just as dangerous as overconfidence.

How to write a Forex trading plan?

Having a clear trading plan helps you stay calm and focus on making the most profitable decisions. As mentioned earlier, trading cannot be 100% predictable. Even with a trading plan, decision making sometimes gets messy in the middle of a trading battle. Mainly because Forex traders are human and therefore tend to make decisions based on emotions.
Before making a buying decision, we should do a quick check on our to-do list before placing an order. Trading without prior analysis will be equivalent to driving on the highway without checking your engine оr your brakes - it's not safe, to put it mildly!

But before making any trading decisions, you must choose the right trading software and a regulated broker.

It doesn't matter how good a trader is; without a reliable broker and a suitable trading platform, he will not be able to execute trades correctly. Here are a few points to help you choose your broker (and trading platform):

• Do they provide access to the financial instruments you choose to trade?
• How competitive are its spreads and commissions?
• What is the maximum spread level it can offer you?
• What trading platform do you offer? Does the trading platform perform the functions you need?
• How fast is the customer support team responding?
• What kind of support can they offer you given your current trading opportunities?

Be realistic

• Do you think you can become a profitable trader?
• Do not ignore the fact that many traders cannot profit from trading. It is very important to understand the reason for the failure.
• Accept that trading success may take longer than expected and may cost you more than expected. How will this affect your plans?
• Are you realistic about your expected returns?

Decide on the tools

What should be done?

• Analyze your chosen tool
• Work on the fundamental indicators of this tool
• Determine if your chosen market is volatile enough to meet profit targets?
• Determine if there is liquidity for entry and exit. If not, consider other tools.
• Find out if the timeframes are suitable for your strategy? If this is not the case, consider choosing a different instrument or timeframes.
• Try to develop a strategy that offers versatility to market and profit when:

The price is at a support or resistance level;
There is a clear trend;
Gap;
The price is at local highs and lows;
There is enough volatility in the markets.

Know your limits

• How much capital is required to trade the selected instruments?
• What margin do you need?
• What is the minimum position and stop loss as a percentage of equity?
• If the instrument is too volatile or the margin is too expensive, keep exploring, build up the necessary capital, or consider an instrument that is better suited to the capital available to you.
• Learn the advantages and disadvantages of the leverage available for this instrument.

Monitor your trading strategy and price action

• Where are the support and resistance levels located?
• Locate supply and demand on the selected instrument
• Choose your trading style - day trading, swing trading or scalping?
• Clearly define daily and weekly profit and loss levels

Respect your own rules and set them ahead of time

• Trade leverage
• Risk per trade
• Risk per day
• Initial trade price
• Risk management
• Trade exit price

After completing all the steps mentioned above, you still need one thing: patience.

Always wait for the right moment and stick to your trading strategy.

How to write a trading plan for a trader - Be smart
Another important part of your trading is defining your trading goals. This will help you keep track of the price.

Having a clear set of goals will give you the ability to track all events in your trading. Try to set goals, including your execution plan, rather than just focusing on your financial goals.

In addition, you must decide how to achieve your goals within the set time. The scale of your success can be measured by the profit your trades can generate.

When setting goals, they should be prudent, measurable, achievable, relevant and traceable.

Trader's Trading Plan - Trading Plan Development Tools

To help you better manage your risk, Admiral Markets has developed some of the most advanced risk management tools available with Metatrader 5 Supreme Edition. The Mini Terminal tools and the MetaTrader trading terminal allow you to control the risk associated with multiple positions and predetermine the number of lots.

Trading filters can be a set of conditions based on several indicators. Filters reduce the number of positions and trading opportunities, but good filters can improve the quality of positions and, as a result, the success of positions in your trading strategy.

Psychology of a trader. A trader needs to be confident in their intraday trading plan or swing trading plan.

Rules and routine. An effective trading plan contains a set of rules and routines that allow a trader to create a well-designed structure that can be relied upon.

historical testing. Historical tests give confidence and experience to the trader, which helps it is better to trade in the foreign exchange market, the stock market and the commodity market.

Software or trading platform. A good trading plan means having the best trading software. Therefore, an efficient trading platform such as MT5, which is reliable and popular among retail and professional traders, is an essential element for your trading plan.

How to write a Forex trading plan?

The process of developing a trading plan is quite simple.

The first step is to determine how often you place buy and sell trades in the foreign exchange market. Every hour or just once a day?

To answer this question, you can look at your account history and determine how many trades you open per day or week on average and how long those trades last. This is vital because your plan should clearly illustrate the measurement of time you use in your Forex trading.

Here are the steps to take when getting started in trading and how to build an effective trading plan

Know yourself

This is one of the first steps required to create a complete trading plan. Clearly defining your behavior as an investor or trader is essential as a Forex trading plan should be a reflection of you to ensure optimal performance and ease of execution.

If your Forex trading plan doesn't reflect you, it won't work and traders will eventually give up.

Set Goals

This step should encourage you to create a complete trading plan that is achievable and in line with your goals. You must be clear about the goals you want to achieve, as well as the methods and tools that will help you achieve them.

Thus, in order to achieve the main goal, it is necessary to determine the time horizon.

Example: Your goal is to become a profitable trader and you can set a timeframe of 2, 5 or 10 years to achieve this goal.

You need to identify all the main steps that will lead you to this goal.

For example: to develop a strategy or to conduct a historical test to find out the statistics of the strategy, you determine the time required to complete these tasks briefly and completely, then enter it into your trading plan. This will help you identify deadlines and move forward with your trading activities.

Time horizons for major tasks can be set daily or weekly.
Choose which type of trading suits you best:

At this point, it is important to consider your current situation:

Do you have a permanent job?

If yes, then swing trading is the type of trading that probably suits you best. You can invest and trade forex, stocks and commodities in just a few minutes analyzing charts daily.

Do you have a part-time job?

If so, intraday trading might be the best fit for you. You can trade throughout the trading session and take advantage of the most volatile hours of the day to make profit every day.

Do you have a permanent job?

If so, you have plenty of time to perfect your trading strategy and diversify your activities by trying your hand at swing trading, intraday trading and scalping.

What is your starting capital?

The amount of your starting capital also helps to better determine the type of trading that suits you best. We also have to mention risk management and the amount per trade you are willing to risk.

If you have a €2,000 account and want to use swing trading strategies and therefore take positions on daily timeframes risking as little as 0.5% of your capital, you can have more trading opportunities right in front of you.

Keep in mind that the greater the distance between your entry point and your stop loss, the more capital you will need to risk 0.5% of your capital.

Forex Trading Plan - Determine Which Tool Is Best For Your Trading Method
Here it is important to consider the costs associated with transactions, namely the number of commissions and the size of the spread.

In addition, depending on the nature of the instrument, trading hours can vary and play an important role in a Forex strategy.

Find your trading method

Discretionary method

This method is aimed at making a decision based on a subjective analysis of trading. Profitable discretionary traders are usually very experienced traders who are very good at broadcasting price action in the currency or stock market. Therefore, this method does not rely on systematic conditions to open a trading position.

Mechanical method

Unlike the discretionary method, here each trading position is based on the systematic conditions required to open a position. If at least one of these conditions is not present, the operation will not be performed. Mechanical trading systems are very popular because they lack some of the hesitation and subjectivity.

aggressive method

Aggressive position management means raising your stop loss as quickly as possible to profit from the position. The limitation of this type of management is to see that the stop loss is placed at very little profit above the entry point, just before the move actually moves in the expected direction.

Conservative method

Conservative position management is to leave a larger distance between the entry point and the stop loss. This gives the assets more space so that you have more opportunities to see movement in the expected direction. The limit of the conservative approach is to try to take profits much further because the stop loss is also far away.

How to Create a Forex Trading Plan - Risk Management

Position management, as well as associated risk, can be simplified or automated using the tools provided in the MetaTrader Supreme Edition with a mini-terminal that allows you to determine the risk for a fixed EUR position, regardless of the number of pips required to place a stop loss. In addition, the end stop can be adjusted so that the position is controlled objectively and automatically.

trading journal

Trade logging allows you to analyze the strategy you are using to better understand its behavior and identify errors. Each position and session should be added to the log to really help the trader analyze their trading strategy.

Historical tests

Historical tests are very important in determining the profit/loss ratio of your trading strategy. This step gives you experience and confidence in your strategy. The most important thing is to analyze the data and find profitable trades that will recoup losses and increase your capital in the long run.

Trader's trading plan

day trading
Traders usually draw up trading plans in Excel format. This format makes it easy to analyze and design your trading plan template. As we have seen, an important criterion for a good Forex trading plan is the correct choice of timeframes and limiting the number of transactions.

Imagine a trading plan for an intraday trader.

• If you are an intraday trader, your plan should be for 24 hours.
• The next step is to determine the number of trades that you must make within a certain period of time.

Analyze the number of profitable trades and multiply them by 1.2. In other words, if a trader averages 20 trades per day but only makes profit on 6 of them, the trader should not make more than seven trades per day.

Limiting the trader is definitely helpful to avoid overtrading.

swing trading

• If you are a swing trader, your trading plan should be based on weekly timeframes. Let's say you want to close all your positions at the end of the week to control the uncertainty of the weekend. This example trading plan consists of opening positions until Thursday each week to take advantage of the trend of the week and avoid weekend signals as positions close before the weekend.
• A trader should only open one trade for each pair in his portfolio so as not to expose his account to highly correlated pairs.

These criteria are only a small part of the swing trading plan.

We have looked at the importance of choosing timeframes and how important it is to limit the number of trades.

Now let's look at other elements that will help you prepare your trading plan in the foreign exchange market.

Trading Plan - Trading Signals

Many of us, when we started working, found ourselves in the following situation:

We want to open a position because we are sure that something important will happen. A few moments later, the position is open - and now what?

• How will we manage risks?
• When should a position be closed?

To avoid these questions, there are trading plans. An effective trading plan should include a clear description of the entry signals that you plan to use in your trading strategy. Once you have set these signals, you just need to follow them.

Entry Signals

It is important to note that these signals should be as complete as possible to help you remove subjectivity from your decisions. A good way to do this is to include indicators in your trading signals.

exit signals

Very similar to the input signals. Traders need to be very clear about when to exit a trade.

When it comes to learning how to prepare an expert level Forex trading plan, it is important to open a position at the right time and with the right tool.

However, in some cases, you can close a good position and still end up with a loss because you didn't have the patience. Or, conversely, you may close a winning position too early and lose all the profit you could have made. This is due to the lack of information about exit signals in the trading plan.

Trading plan n Forex - Stop Loss and Take Profit

As we have already mentioned, outputs and inputs are important. Such signals allow you to understand how to trade in accordance with your trading strategy.

By following these principles, you remove emotions from the trading process. Another important point to note is that all trading positions must have a stop loss and take profit. It must be kept in mind that stop loss is much more important than take profit.

As a disciplined trader, you must ensure that all trades you place in the forex market already have a stop loss level set. There should be no exceptions when it comes to setting the level you are willing to lose in every position. In addition, your intraday trading plan should actually display the same stop loss distance for each position, although it may differ for different trading instruments.

However, the take profit level is not that important, in order to develop the best forex trading plan, it is recommended to determine the levels at which you want to profit before engaging in any trade.

How to set Stop Loss and Take Profit correctly

This is an incredibly important point in understanding how to become a disciplined Forex trader. Before you open a position, you must know exactly where your Stop Loss level will be. It should always be predetermined - set it at the time of the trade and never lower it.

Naturally, you can close the position before reaching the Stop Loss level if you do not see an opportunity to make money, but never lower your Stop Loss level in order to maintain an open position.

In Forex trading, this is of utmost importance because the more you trade, the more often you will come across situations where you expect a losing position to turn into a winning one.

To accept defeat and close the position that led to the loss is quite difficult. Stop Loss simplifies this task, because by closing the position automatically, it eliminates the psychological factor. However, you should always remember that when a position is open, Stop Loss cannot be adjusted. This can only be done at the planning stage, when you analyze the behavior of the markets and your own actions with a clear mind.

This does not apply to Take Profit levels. If you are a beginner, we advise you to still set Take Profit levels for each of your trades and not change it, even when it seems to you that the market is moving in your favor. Once you gain experience, you can start modifying your Take Profit, especially if by that time you start to profitably set the Stop Loss level.

By the way, regardless of the level of your knowledge as a trader, you should always have a goal of your profit before making a trade.

The three most important points for drawing up a trading plan
An effective Forex trading plan is no different from any other plan you can imagine.

The main idea is to develop:

• A set of rules that you will listen to
• Risk management - first practice on a demo account before switching to a real account.

We have already looked at how to create a complete trading plan, now we need to improve it.

If you trade "at random", without a system or a trading plan, your chances of long-term success are very small.

So, let's focus on improving your Forex trading plan!

Evaluate your trading plan
You need to know if your trading plan is adequate or needs some improvement.

Remember that strategies with a success rate of less than 60% can also be useful.

How?

We offer:

• Be Patient
• Reduce risk from 0.5% to 1% per position
• Try to keep your winning positions
• Use stop loss and take profit
• Set multiple goals to reduce risk and make a profit
• Always practice on a risk-free demo account first

Here are some tips for trading in general:

• Don't try to become a full-time trader right away
• Keep your core job full-time and treat trading as a part-time job to begin with
• After a long practice, you can start working as an experienced trader without leaving your job.
• Working as a full-time trader requires significant capital, which usually needs to be built up over time.
• You may want to make trading your main source of income, but it won't happen overnight.
• To achieve this, you need to be patient and focus on learning.

Only by following these tips, you will be ready to work on a real trading account.

Forex Trading Plan - Money Management

Once you have decided on a trading system, focus on managing your money.

You need to clearly state whether your trading system can trade multiple currency pairs and which ones.

Proper money management includes creating or changing the optimal trading rules for your trading account.

It doesn't matter if you trade to win 1000 pips based on fundamentals or 5 pips based on scalping methods with very small moves.

Even if your fundamental analysis is correct, it can work against you.

Control your emotions

Impulsive and emotional decisions are created in your mind.

Problems usually arise when a trader feels compelled to make quick trading decisions to manage their positions.

Staying calm and patient throughout the duration of the job helps optimize results.

To learn how to deal with emotions, try to make a list for yourself according to the following criteria:

• Optimal level of your emotions
• Do you trade or bet like in a casino?
• Are you an optimist or a pessimist?
• Ask yourself if you are calm or nervous
• Are you determined to stay disciplined?

Trader's Trading Plan - Is a trading plan sufficient for trading?

As you have already understood, developing a trading plan is an important and necessary step in developing a consistent approach to trading in the financial markets.

There is only one problem: plans will never fully respond to all scenarios and situations that you will face as a trader. The same principle works for all life situations - from business to relationships, from battles to sports.

Dwight D. Eisenhower, a World War II general and later President of the United States, explained this by saying, "I have always considered planning useless and planning mandatory."

What does this quote mean? Having a starting point (a plan) is helpful, but it's even more important to be flexible and able to adapt to change.

How to write a trading plan - Add your vision

Trade, of course, is different from war. A trading plan is an important starting point because you must develop a solid vision. This famous quote explains it well: not having a plan leads to failure.

Why is planning critical? The advantage of a trading plan is that it reduces the trader's focus and reduces the number of options, which is a positive thing as traders should be fully focused on increasing trades with a higher probability of making a profit.

Do you really want to analyze charts and think about entry points every minute? No, because it leads to fatigue. Constantly making new decisions on a case-by-case basis undermines your will, often leading to negative or undesirable results.

Traders should use their trading plan as a tough approach to the markets to fully focus on:

• Finding the best settings;
• Implementation of proper risk management;
• Achieve your long-term trading goals thanks to the previous two points.

On the other hand, trading is not limited to creating a trading plan. Traders should actively work to improve their trading process.

Once a trading plan is on the table, traders should not back off and think that this is the end of their learning or their development. Going beyond the trading plan

The priority for traders is to find the best time to enter. All other components of the trading plan may receive less attention than the configuration of entry and exit points.

Forex trading plan - An example of an incorrect trading plan
The main problem is that no one can explain all the factors that can affect a trading plan. When you try to plan for all scenarios and all possible situations, the plan becomes counterproductive.

There are many examples of such cases.

A sports team may have the best superstars, but another team can win a championship because it has worked hard throughout the season to improve its style of play.

The key decision is not to "hang out" for a long time at the planning stage, but to focus on opportunities to improve your trading strategy and find options for constantly developing and improving your trading methods.

However, this advice should not be taken as a recommendation to use as many indicators and tools as possible on your trading charts, as this approach is very unstable and can greatly confuse you, as different indicators can even contradict each other and take you too far away from essence of the traded instrument.

How to Build a Profitable Trading Plan - Plan and Planning
How does the plan affect trading? Traders often get stuck in an endless loop trying to find an entry method and/or the perfect trading system. It is important to create a solid trading plan, but remember that this is only the beginning.

We will focus on these six trading tips:

1. Use your trading plan as an important starting point and focus on it at all stages of trading.
2. Continue to analyze your trades and your mistakes;
3. If necessary, make adjustments to the trading plan;
4. Be the go You can make decisions that are not covered by your plan;
5. Entry points are only part of the deal: make sure your plan covers all aspects of the trading activity;
6. When a trade is open, remember that the goal of trade management is to limit losses and increase the number of profitable trades.

How to write a Forex trading plan - Conclusion

In this article, we have figured out how to create your own Forex trading plan. Remember that in developing your trading plan, you must:

• Be very critical of your trading system, this allows you to quickly identify the shortcomings of your strategy
• Think of trading as a business, not a game or a hobby
• Learn from your mistakes
• Keep improving your trading system

If you have been trading on the MetaTrader platform with Admiral Markets for some time, you can quickly analyze your trades and check how long your trades stay open, what is the average amount of winning trades per day or per week. You can also define the limits we discussed earlier. Once this is done, check your trading strategy for exit and entry signals and describe the requirements for those same signals in your Forex trading plan.

Once you have learned the basics of forex patience and understood how to become a disciplined trader, it's time to put your knowledge into practice. Conduct market analysis and develop your trading plan for the next week. Pre-install trading instruments, prepare entry and exit signals, determine Stop Loss and Take Profit levels, and determine the maximum number of trades that you plan to make.

For your safety, we have compiled a blacklist of brokers.

Dominick Bell

Dominick Bell is 37 years old. Born in Manchester. Married. Graduate of The University of Manchester, Manchester Business School. Works at Cases Computer Simulations.

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