Forex Planning
Planning is the main key for every business's success. All traders, business stakeholders and every company in any field must plan their works well in order to avoid losses and to optimize revenue.
Forex is a financial risky field which you must plan well and be updated to market changes. Forex is a business where you need to try and evaluate and re-plan your work using different strategies to reach the max-profit.
A Forex trading plan is an organized way to executing a trading system that is based on your market analysis and your forecast while evaluating risk management and opportunities.
Forex traders who follow a systematic approach and plan well, are those who survive year after year after year in that risky business.
What you must know before entering Forex trading!
1- Decide how much you want to deposit
2- Decide on your currency pairs
3- Choose an appropriate broker
4- Creating the right Forex account for you
6- Follow analysis about important trade concerns such as UK Brexit
7- Read about Forex signals and trading indicators
8- Watch Forex videos to learn from competent traders
Forex is a try&error trade
After you get the required information, you need to get in business. You must know that Forex is a try&error trade, and you may experience possible losses. Only your plan will enable you avoiding great money losses. Traders must focus on the trading plan.
Forex trading is a business and every trader should approach his or her business professionally. Forex trading isn't a video game in which you aim and shoot at a target on the screen for fun and hope to see a gold coin appear. Instead, we're effectively taking part in a highly competitive domain populated by large, powerful players like banks and hedge funds. Therefore, a planned trading system that is detailed, realistic, and well structured will be needed if you really want to be successful in this business.
The key of a planned trading system is to have a set of well defined trading objectives in terms of your personal trading situation and target profit, the opportunity profile for currency pairing, risk management, and account equity. If you don't take the time to learn and understand how these variables can affect your results, then you don't have any chances for success in Forex business.
- Personal Trading Situation and target profit
First, you need to set a useful target for trading according to your personal trading situation, including the number of currency pairs traded and the volatility of each pair (measured by Average Daily Range (ADR)), personal trading style, times of day available to trade, and the total time available each week for trading.
As an example, a target of 500 pips per month might be an unrealistic target for someone who has only 2-4 trading hours per day, twice per week, focusing on scalping on a pair such as EUR/CHF, which has a lower ADR. Therefore, it is necessary for each trader to realistically consider his or her own personal trading situation in order to derive a challenging but achievable target for monthly trading profit.
- Opportunity Assessment
An effective method of conducting an opportunity assessment is to look back over a chart for the past 1-6 months. On this chart, highlight the times of day and days of the month when you are generally available to trade. In relation to your trading style, how many setups were apparent on that chart, and how many pips potential did they offer relative to the realistic take-profit levels where you would have exited the trade!
- Risk Management
Managing risk is the most important part of any trading plan.
Winning trades are only one part of the profit equation. The other part is unprofitable trades, which have to be accounted for in deriving a realistic bottom-line objective. It is critical that your trading plan specifically allow for losses.
Trading loss can be divided into two categories: the average size of stop loss employed, and the frequency of trades being stopped out. If you maintain a record of your trading activity, whether in a demo or live account, it can be useful to simply plug in your actual figures for average stop loss and Win/Loss and assume those performance metrics can be projected into the future.
If your trading situation does not allow for this, you may need to consider wider stop losses, which will in turn have some effect on Reward/Risk and position sizing.
- Account Equity
Depending on account equity, a lot of dollar profit can be generated from 500 pips per month. For example: 500 pips per month operating profit into a financial profit in USD (assuming a US dollar trading account and 500 pips realized on a USD quote pair).
As indicated above, with a 30-pip stop and risking 1.5% of account equity on any single trade, 500 pips equates to $2,500 profit for every 10K increment in Equity. This results in an actual leverage utilization of 5: 1, which is apparently much lower than the maximum leverage traditionally offered by many brokers.
Note that the money management benchmarks are very general that they do not reflect partial lot sizing for levels of account equity between the categories quoted above. In other words, profit-per-trade potential can be further optimized by calculating position size (number of mini lots per order) each and every time a trade is about to be entered, relative to the current actual account size using the 30-pip stop and 1.5% account risk formula illustrated above.
Based on the above, we can see how Account Equity can affect our financial profit, increasing our operating profit (in pips) through leverage. Thus, the question every trader inevitably faces when opening a new account - "how much money should I put in?" - needs to reflect consideration for the maximum amount that could be lost entirely without disrupting household finances, while at the same time addressing the question "how much do I want to make?"
If you want to earn $10,000 per month on 500 pips, for example, then your trading account needs to be funded to the tune of $40,000. If that is not possible, then the target for financial profit (in dollars) will need to be reduced, or the target for operating profit (in pips) will need to be increased.
It will be much better to start building up your trading confidence by building up your account slowly and consistently over time than to have to repeatedly answering call after call from your broker.
Focus on your Forex plan as it's the optimal protection in such business.
Thanks for sharing this useful information about Forex Risks, this may helpful for beginners.
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