A Comprehensive Currency Trading Plan Is Crucial To Your Trading Success.

If you have a currency trading plan covering all aspects of trading it is easy for you to pin point areas of your trading that need improvement. Without a currency trading plan you have no way of ascertaining which area is hindering your profitability.

Currency Trading Plan
There are a number of different parts to a currency trading plan. The depth that you go into when writing your currency trading plan is up to you. A good currency trading plan will remove all the emotions from your trades. Some points that you should consider including in your currency trading plan are as follows:

Analysis Criteria: Specific conditions must be met to consider a currency pair to trade with and requires the use of technical indicators such as trend indicators, momentum indicators or hybrid indicators, how you read them, chart patterns that you trade and don't trade.

Entry Strategy: determines the price at which you will enter your trade. For example, an entry order can be an order to buy if the market trades above a certain level. Learn how to read technical indicators and learn what an entry signal looks like to you, know what you will use as entry signals.

Open Position Strategy: Is the most important and focuses on managing your emotions after you have entered the market. Too many open trades are harder to track and they put too much of your money at risk. When real money is involved your emotions change greatly which can effect your profitability as a trader. If your emotions are not in check they may cause you to stop following your currency trading plan because fear or greed got the better of you.

Stop Loss Strategy: A disciplined stop loss strategy is critical to the preservation of profits and trading capital. Your currency trading plan must include a stop loss strategy for use on all trades. The stop loss price that you set is up to you. It depends on your risk profile, trading capital and financial goals as of how much you should set for a stop loss. A stop loss between 1-2% of your trading capital is suggested. If your starting balance is small and you trade mini lots you may need to set your stop loss order far enough to make the trade workable. For this reason a higher percentage of risk may sometimes be acceptable.

Profit Taking Strategy: Before entering a trade you need to determine your profit taking level. Good traders remain flexible with the profits they take. When a trade moves in your favour you may have a strategy to lock in a profit that matches the amount of your trade at risk. You can then move the stop loss to the entry point while you continue to watch the profit run. A limit order can be placed at a price at which you will automatically sell if the trade goes your way. You will automatically collect your profits even if you are away from your account

Discipline: Without it a currency trading plan is useless. If you stick to your currency trading plan and you are not successful then your plan needs adjustment. If you don't there is no way to tell if your currency trading plan is at fault, or if it was the decisions that you made outside of your plan.

Exposure: You should always know what level of exposure you are comfortable with in the market. A general rule of thumb is to risk no more than 2-3% of your available trading capital for any one trade. This will ensure that regardless of what happens to you, you will still have money left to trade with even if you have made a number of consecutive losses. After making the necessary changes to your currency trading plan you can still go back to the market.

Money Management: Forex money management is very important as it focuses on how you protect and allocate your trading capital. You need a strategy of limiting risk while making the most out of favorable market moves. When you allow your profits to run it is necessary to trade with a risk/reward ratio of about 1:2 or greater. Risk is the amount of pips you are willing to lose in any one trade and reward is the amount of pips you intend to gain in any one trade. To maintain the risk/reward ratio it is wise to cut your losses short and let your winning trades run


Forex Winning Strategies: a Coach's Guide to building a successful Trading Plan by Vic Noble.