Make no mistake about it; every forex trader needs a philosophy.
Much more than this, they also require a detailed plan of action that includes several logical steps. This serves as the practical embodiment of their individual trading philosophy, combining individual values such as knowledge, preferences and appetite for risk within an actionable strategy.
Without this, it is almost impossible to thrive in a volatile marketplace, especially one that is vulnerable to economic and geopolitical trends.
The 3 Most Important elements of a successful Forex Trading Plan
While each specific plan may be unique to each individual, there are several universal elements that are integral to success.
These include: –
A Clearly defined objective and strategy
Every successful plan starts with a clearly defined objective, which should sit alongside a strategy that enable individuals to achieve success. The level of clarity that underpins your objective is absolutely imperative, as this makes it easier to determine low or high time frames and estimate rewards.
This also makes it far easier to develop the detail of your strategy, which is also crucial to success in a volatile and constantly changing market. Even if this takes time, it is a step that must be followed and completed with diligence.
Determine the risk to reward Proposition
With an objective and strategy in mind, the next step is to create a risk to reward proposition for each individual trade. This should be carefully aligned to the currency pairs that you trade and your inherent appetite for risk, while it should also offer either short or long-term gains.
The determination of a detailed risk to reward scenario should also be completed prior to entering the market, as this enables you to make an informed decision and develop an understanding of precisely what could happen in every eventuality.
Integrated technology and automate trades where possible
From complex software and algorithms to online brokerage firms such as ETX Capital, technology plays a huge and pivotal role in the forex market. It also helps to automate the aspects of trading that are most important, such as minimizing loss and negating risk.
Given this and the negative impact that emotion and human error can have on your trades, you must therefore strive to integrate technology and automation where possible within your plan.
Start by identifying trading platforms, before considering how automated trading algorithms can help you to simplify your investments without compromising on their viability.