Most trading plans overlap with various methods. You may choose to trade on more than one time frame and you may use part of the same plan you use to trade on a higher time frame. We will look at a few areas that need to be considered.
1. How long will you be in the trade? Are you gong to be a Forex scalper? Staying in a trade no more than a few minutes at a time or are you looking to be a longer term trader? taking in an entire trend over the period of a week or two.
2. Trading psyche. How will you make your trading decision? Will you use technicals or fundamentals to make the decision to buy or sell?
3. Risk. What are you going to put on the table? This is speculating, what will you risk to gain your target?
4. The currency pairs. Will you choose one pair to trade or a bunch of them. Some are more volatile than others and the risk is higher.
At this moment, its not that important to know how you will trade or what. The point is that you have started to think about a trading plan of some sort and that your thoughts are not random. The best way to test your plan is to open a demo account. Would you believe that some just open a live account and start trading, hard to believe right? But sad to say true. No plan no practice, no nothing! And guess what… they loose big time and think its all a scam and that Forex trading is not for them. Do not be one of them. Look at your own situation and make a trading plan that fits into your life style.
This is the way it has to be looked at. No plan? Plan to fail… Simple as that. Its the trading plan that keeps us going down the road to success. I can’t stress this enough, use the demo account to perfect your plan. Then move it over to the real account and trade small to start with. No one to my knowledge has yet to find the “Holy Grail” of trading methods but if you do find it please tell me. So forget all you see on the internet about that its lies and crap. The fact is you will have good days and bad days in trading Forex. By applying a good trading plan you will have days of small losses and days of larger wins.
When you use your well tuned trading plan you will be ready for what the market can throw at you. Trading Forex is not easy but when success comes it can be very rewarding indeed.
I have been involved in the Trading industry for over 16 years now and write on many of the subjects that relate to Forex Trading.