In the world of forex trading, a solid trading plan is the key to success for every trader. Consistency in following that plan is the primary foundation for achieving desired results, much like in conventional businesses that rely on well-thought-out strategies. A trading plan encompasses strategies, target markets, costs, and profit projections. When the initial plan doesn't meet expectations, having a backup plan determines the continuity of trading objectives.
Imagine starting a business without a clear plan. Many traders make the same mistake in trading, relying on instinct, rumors, or mere speculation. Although it may provide short-term gains, trading this way is not sustainable. For optimal results in trading, a well-structured trading plan is necessary.
A renowned Turtle Trader member, Curtis M. Faith, emphasizes the importance of trading planning in his book "Way of the Turtle." Faith summarizes six main components of a trading plan:
- Market: Choose trading instruments that fit the characteristics of your trading system, such as currency pairs, stock indices, or commodities.
- Position Size: Determine the lot size to be traded to manage risk effectively.
- Entry Point: Identify the right time to open buy or sell positions based on signals from your trading system.
- Stop Loss Point: Set the appropriate time to exit losing positions to protect your capital.
- Exit Point: Determine the right time to exit profitable positions to secure your profits.
- Trading System: Choose a trading system that you will use, such as breakout, a combination of technical indicators, or other strategies that suit your trading style.
Having a detailed trading plan helps you avoid unnecessary losses and maximize profit potential. Consistency in following the initial plan and routine evaluation of trading performance will help achieve long-term success.
.jpg)
.png)
.jpg)
.png)
