It’s a commonly known fact that all forms of financial trading involves risks, Forex Trading is no exception. And in order to achieve Forex Trading Success, the first and foremost step is to have a robust trading plan.
Serious Forex Traders like myself who make a living trading the currency markets treat this as a form of “Business”. And like all brick and mortar business models, our “Trading Plan” is the equivalent of a “Business Plan”. Imagine if you are planning to loan money to a new business as a form of investment.
Would you fork out your hard earned money to someone who don’t even have a decent business plan or to someone who said they were going to start their business based on their “Gut” feeling? Logically speaking, it is not feasible for a person to start a business solely based on gut instincts alone, yet alone trading with your hard earned money.
Unfortunately, the truth of the matter is that majority of new traders have the tendency to start their trading endeavors in exactly that manner. Newbie traders often do not have any trading plan or agenda at all. In fact, most beginner traders barely have a valid reason for entering a trade, they simply shoot from the hip.
Now, how do you expect to achieve Forex Trading Success if you don’t even have the faintest idea what you are getting yourself into?
Luckily, creating a trading plan is actually not that difficult.
In my book, there are several essential components of a trading plan and these include the following:
- Trading Goals & Targets.
- What Currency Pairs To Trade & When To Trade Them.
- Proper Money Management.
- Effective Trading Strategy.
- Trading Mindset
- Trade Analysis & Reflection.
Trading Goals & Targets
First and foremost, you got to ask yourself Avatrade Trustpilot reviews why are you trading in the first place?
What are your goals and objectives for trading? How much return on your investment do you want to make in a month? Are you going to be a day trader or a swing trader?
These are the typical questions you need to know before you even begin trading.
Next, you need to define your trading goals and targets. Most newbie traders have totally unrealistic goals. I actually met a new trader who have no prior trading experience, bought a best selling e-book on Forex Trading on the internet and sworn he will be able to turn his initial $10,000 investment turn into $100,000 in one year’s time. Although this is possible, it is highly improbable. These unrealistic expectations are often the Achilles Heels of most newbie traders.
From my experience, I reckon that if you are able to break even in the first year, give yourself a pat on the back. Most beginner traders I know can’t even achieve that.
What Currency Pairs To Trade & When To Trade Them
For some weird reasons, most traders have the tendency to trade their own currency, perhaps this is their way of showing “Patriotism” or something like that.
But my personal preference is to trade currency pairs that are fairly volatile and have tight pip spreads. Personally, I prefer to avoid trading currency pairs that are illiquid and choppy. Currency pairs like the EUR/USD and the USD/JPY are my favorites. Other traders I know love trading choppy pairs instead, well, it’s entirely up to your own trading preference.