10 Step For Perfect Trading Plan in Forex

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10 Step For Perfect Trading Plan
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Index

• Trading Plan
• 10 Step for Perfect Trading Plan
• 1. Skill Assessment
• 2. Mental Preparation
• 3. Set Risk Level
• 4. Set Goals
• 5. Do Homework
• 6. Trade Preparation
• 7. Set Exit Rules
• 8. Set Entry Rules
• 9. Keep Records
• 10. Perform a Post-Mortem

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Trading Plan

• Once a trader knows where the market has
  potential to pause or reverse, they must then
  determine which one it will be and act
  accordingly.
• A trading plan should be written in stone while
  you are trading, but subject to re-evaluation
  once the market has closed.
• It changes with the market conditions and adjusts
  as the trader's skill level improves.

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• Each trader should write their plan, taking into
  account personal trading styles and goals.

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1. Skill Assessment

• Are you ready to trade?
• Have you tested system by paper trading it and do
  you have confidence that it works?
• Can you follow the signals without hesitation?
• Trading in the markets is a battle of giving and
  take.
• The real pros are prepared, and they take their
  profits from the rest of the crowd who, lacking a
  plan, give the money away through costly
  mistakes.

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2. Mental Preparation

• How do you feel? Do you feel up to the challenge
  ahead? If you are not psychologically and
  emotionally ready to do battle in the markets, it
  is better to take the day off.
• Otherwise, you risk losing your shirt.
• It is guaranteed to happen if you are angry,
  preoccupied or otherwise distracted from the task
  at hand.

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• Many of the traders have a market mantra they
  repeat before the day begins to get them ready.
• Create one that puts you in the trading position.

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3. Set Risk Level

• How much of your portfolio should you risk on any
  one trade?
• It can range everywhere from around 1 to as much
  as 5 of your portfolio on a given trading day.
• It means if you lose that amount at any point in
  the day, you get out and stay out.

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• It will depend on your risk tolerance and trading
  style.
• Better to keep the powder dry to fight another
  day if things aren't going your way.

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4. Set Goals

• Before you enter a trade, set the realistic
  profit targets and risk/reward ratios.
• What is the minimum risk/reward you will accept?
• Many of traders will not take a trade unless the
  potential profit is at least 3 times greater than
  the risk.

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• Example If your stop loss is a dollar loss per
  share, your goal should be 3 profit.
• Set weekly, monthly and annual profit goals in
  the dollars or as a percentage of the portfolio,
  and re-assess them regularly.

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5. Do Your Homework

• Before the market opens, what is going on around
  the world? Are overseas markets up or down?
• Index futures are a good way of gauging the
  market mood before the market opens.
• What economic or earnings data is due out and
  when?

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• Post a list on the wall in the front of you and
  decide whether you want to trade ahead of an
  important economic report.
• For most of the traders, it is better to wait
  till the report is released than taking
  unnecessary risk.
• Pros trade based on the probabilities. They don't
  gamble.

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6. Trade Preparation

• Whatever trading system and program you use,
  label major and minor support and resistance
  levels, set alerts for the entry and exit signals
  and make sure all signals can be easily seen or
  detected with the clear visual or auditory
  signal.
• Your trading area should not offer disturbances.
  Remember, this is a business, and distractions
  can be costly.

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7. Set Exit Rules

• Many Traders make the mistakes of concentrating
  90 or more of their efforts in looking for the
  buy signals, but pay very little attention to
  when and where to exit.
• Some Traders cannot sell if they are down because
  they don't want to take the loss.
• Get over it, or you will not make it as a trader.

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• If stop gets hit, it means you were wrong.
• Don't take it personally.
• Professional Traders lose more trades then they
  still end up making profits.

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8. Set Entry Rules

• That comes after the tips for exit rules for a
  reason exits are very important than entries.
• Your system should be complicated enough to be
  useful, but easy to facilitate snap decisions.
• If you have 20 conditions that must be met and
  many are subjective, you will find it difficult
  if not impossible to make trades.

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• Computers don't have to think or feel good to
  make the trade.
• If conditions are met, they enter. When the trade
  goes in the wrong way or hits to profit target,
  they exit.
• They don't get annoyed at the market or feel
  strong after making a few good trades.
• Each decision is based on probabilities.

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9. Keep Records

• All good traders are also good to record keepers.
  
• If they win a trade, they want to know precisely
  why and how.
• More importantly, they want to know the same when
  they lose, so they don't repeat the avoidable
  mistakes.

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• Write down the details such as targets, the entry
  and exit of each trade, the time, support and
  resistance levels, a daily opening range, market
  open and close for the day.
• Also, you should save the trading records so that
  you can go back and analyze the profit or loss
  for the particular system, draw-downs, average
  time per trade and other important factors, and
  also compare them to a buy-and-hold strategy.

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10. Perform a Post-Mortem

• After each trading day, adding up the profit or
  loss is secondary to knowing the why and how.
• Write down your conclusions in the trading
  journal so that you can reference them again
  later.

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Thank You