Having some sort of a guide while trying to navigate the turbulent Forex markets and your trading journey is of crucial importance. 

If you were to ask any trading expert or a professional investor how they manage to successfully make money in online trading and win every day, their answer would certainly be because of a well-made plan. 

However, constructing such a guide takes a tremendous amount of time, research, and effort to gather the necessary knowledge and data in order to put together a working solution. Reading this article will help you understand how to create a trading plan yourself.

What is a Trading Plan?

One well-written trading plan is a series of steps, precise inputs, and guidelines that refer to how, when and what securities to trade. It also contains information on when and which positions to open and close and how and when to conduct other important operations.

This should be unique to every trader, as each market participant has their own trading behavior depending on different factors. Some of the variables that distinguish one plan from another are the amount of time on hand, capital, goals and skills. 

Forex veterans are firmly promoting the idea of the trading plan being your guiding star, without which you are destined to lose. 

However, coming up with one is not an easy task. It is always said that just based on several articles you’ve read online and opening a brokerage account, you simply cannot be competent to put together a functional plan. Only after acquiring a certain amount of knowledge and experience can you succeed in making one. 

Why Do You Need a Trading Plan?

The immense importance of a trading plan heavily affects a trader’s general success in the market. Imagine you’ve come up with a certain amount of capital that you wish to invest, but you have little knowledge of how to do so. 

The Forex market seems attractive, so you decide to try your luck. After opening a couple of risky trades, you quickly end up losing your precious investment due to not knowing what securities were best to invest in and how you could have acted in order to prevent loss.

Besides the crucial role in damage control, a trading plan can help you manage your capital better, and cut out the potentially devastating effect intense emotions could have on your actions. 

In relation to that, your moves on the market will be objectively guided and disciplined, and you will be able to determine what needs changing and improvement.

Create Trading Plan Step-by-Step

As we’ve previously made it clear, your trading plan is characteristic for you only. It should be built on the objective assessment of your investment capabilities, the time you have on hand, and your ultimate objective. 

All of these elements have a certain role and influence on what your plan looks like. Creating a profitable plan, however, is a several-stage process.

Outline Goals and Risks

First and foremost, you need to have a clear vision of what your trading objective is. While most beginners are blindly focused on making a quick profit, someone else’s true goal could be entirely different. 

It’s not a lie, though, despite how passionate you could be for trading, that one of the greatest confirmations of trading success is eventually the profit you’ve accumulated.

Defining your risk tolerance level is one of the key aspects of developing a working plan. If you’re a beginner trader, try lowering the investment to as little as 1% of your total capital and allocate your portfolio accordingly. Testing the waters first is probably smarter than immediately going big with higher leverage and losing more than you’ve expected.

Decide How Much Time You Have for Trading

Trading isn’t just opening and closing positions. It also includes a lot of time spent researching, market watching and learning. All of that could affect your total amount of time available for concrete trading operations. 

You might want to formulate a particular plan depending on how much time you can dedicate to trading. Always ask yourself how many hours or minutes in your day you can actually commit to spending on placing orders and monitoring your trades. 

If you have more time daily, you might consider opening a lot of smaller positions (day trading). If that’s not the case and your available time is limited, you might want to consider placing orders that take longer to mature (swing trading). Also, using particular options to manage your risks, such as limits, stops, and others, can help you if you don’t have many hours a day to spend on these actions.

Define Trading Strategy and Assets to Trade

The market is a difficult thing to predict, but there are ways to do this. Fundamental analysis and technical analysis are your key considerations when deciding which strategy to use. This is an acquired skill that requires a lot of research and observation, so be patient.

Learn about which factors influence market shifts – for example, what causes crude oil to appreciate or depreciate. Some trading instruments, like cryptocurrencies for instance, are more volatile than the others, say EUR/USD Forex par. Your appetite for risk will heavily influence your business plan and the selection of assets.

Decide How Much Capital You Have

The most important rule is that you should never risk more than you are ready to lose. You should consider this rule to be an immutable law of nature, especially considering that the majority of market novices lose their money rapidly.

Make sure that you calculate the specific fees, spreads, commissions and other charges before committing any funds. Understand that sometimes you may end up with a loss even with relatively favorable market conditions.

As always, practice makes perfect, so take full advantage of a free demo. This way, you can get a feel of how different numbers come into play without risking a penny.

What to Do If Scammed While Trading?

It’s no secret that the online trading scene has become plagued with various financial swindlers. Sometimes, their deception is so thoroughly developed that it becomes nearly impossible to see through.

If you suspect you’ve become a victim of a scam broker, contact your bank and regional financial regulator for help. Should you decide that the fund recovery process is either too time-consuming or too complex for you, you may always rely on our experts. We are available 24/7 via the live chat, and our first consultation is free of charge.