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10 Step For Perfect Trading Plan in Forex

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Having a Forex trading plan is one of the key elements to becoming a successful Forex trader. Many traders never even make a trading plan, let alone use one regularly. Read 10 Step For Perfect Trading Plan in Forex. – PowerPoint PPT presentation

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Title: 10 Step For Perfect Trading Plan in Forex


1
10 Step For Perfect Trading Plan
2
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

3
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.

4
  • Each trader should write their plan, taking into
    account personal trading styles and goals.

5
(No Transcript)
6
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.

7
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.

8
  • 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.

9
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.

10
  • 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.

11
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.

12
  • 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.

13
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?

14
  • 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.

15
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.

16
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.

17
  • 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.

18
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.

19
  • 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.

20
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.

21
  • 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.

22
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.

23
Thank You
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