How to Write a Trading Plan
A trading plan is a complete guide to what a trader will do in the market. This plan should include clear rules for entering and exiting the market, money management rules, and also outlining time frames, trading instruments. This should be made before starting trading. The trading plan consists of:
Define what type of trader: scalper, day trader, swing trader or position trader. For example, scalpers execute large amounts in short periods and target profits within a few pips, while swing traders keep trades ranging from days to weeks.
Trade financial instruments.
There are many instruments to choose from: currency pairs, metals, commodities, CFDs, etc. Each instrument has its own characteristics and trading conditions. For beginners it is recommended to choose 4-5 trading instruments and study them in depth.
Signal to enter the market.
Make an analysis of the current market situation. Traders can do this using technical analysis tools: MACD histogram or Stochastic Oscillator, support and resistance levels, chart patterns, etc. Whatever trading strategy a trader is using, the reliability of the signals needs to be ensured. Analyze fundamental data and assess their impact on currencies. Monitor news on the economic calendar. It is not recommended to open transactions 30 minutes before and 30 minutes after the news release.
Signal to exit the market.
Determine when the trader will close the position. It is important to have a definite strategy, based on when the trader will exit the market.
Stop Loss and Take Profit levels.
These orders help traders limit losses and set profits on sharp market movements. To limit losses, determine the amount the trader is willing to bear and place a Stop Loss. The recommended risk level should be 2-3% of the trading capital for each transaction. Take Profit is used to set profit. The standard profit/loss ratio is 1:3. The potential profit must be several times more than the risk.
Perform analysis on closed transactions, record the results, and perform error corrections. In this way, the trader can improve the trader’s trading strategy.
Write down what the trader wants to achieve on Forex. Targets must be clear and achievable. Strive to achieve the ideal transactions written in the trader’s trading system. The Forex trading plan must precisely meet the requirements and strategy of the trader, and include certain points that need to be corrected from time to time. Plan a trader’s trade and follow that trading plan. For more efficient and profitable trading, the broker provides analytics. Just Forex Analytics section consists of market overview, technical analysis, market news, economic calendar and daily forecasts, where analysis of major currencies is published.