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In 2016, Nial won the Million Dollar Trader Competition. Having a Forex trading plan is one of the most important pieces of the puzzle of becoming a consistently profitable Forex trader. It is this lazy type of thinking that gets many traders into trouble and causes them to blow out trading accounts. Success in the markets is a function of discipline, and most people simply do not have enough self-discipline to determine if they are trading emotionally or objectively. Having a written out pre-defined trading plan means you are making an effort to hold yourself accountable to something, this is necessary to forex trading success because there is no one to be accountable to as a trader. The more you push and struggle by over-analyzing market variables the more your trading account is going to suffer, this is one of the biggest psychological paradoxes and hurdles that traders need to overcome before they can realize their full potential as market technicians.
This is all well and fine as long as you can manage to maintain your patience as your winning percentage improves. This may seem a bit counter-intuitive at first but it actually is one of the biggest reasons that many traders fail to make money consistently and end up repeating the same cycle of boom and bust in the market. Being able to recognize this feeling of euphoria or over-confidence and calmly and consciously over-ride it by walking away from your trade station for a period of time is the best medicine to fix this emotional trading mistake that so many traders make. One of the best ways to not let emotions influence your trading activities is to have a defined trading plan that describes in concrete terms what you will do in any given market scenario.
Many traders do not attempt to have a trading plan because they aren’t really sure where to begin or how to write one. It really does not need to be extremely long or complicated to be effective. So what exactly does a high quality trading plan need to contain? Well it doesn’t need to be super complicated, as stated previously, the MOST important aspect of an effective forex trading plan is that you can somehow force yourself to ACTUALLY USE IT.
Tape it up somewhere that you will see it every time you trade, read it every day. What are the critical elements of a trading plan? Determine the risk to reward scenario on any potential trade setup before entering it. Also, make sure you have a thorough understanding of Forex position sizing. After the trade is over, make sure your trading plan includes an activity or some mandatory thing that you do after you have exited a trade, whether it was a winner or a loser.
The period of time right after a trade is one of the most, if not the most, emotionally sensitive period for traders. Winning trades also need a period of inactivity once they are closed out. This article has supplied you with the reasons WHY you need to have a Forex trading plan and some very good ideas about what you need to include in your trading plan. There is no concrete way to make a good trading plan, but the 5 concepts included in this article are a great starting point.
Feel free to add any of your own ideas or concepts presented in my forex trading course to the outline presented here. This article has renforced why i have not gone live as without a trading plan and strategy your confidence can take a big knock playing the gambling game . Thanks Nial for all the refresher lesson you are sending to me from time to time they are an invaluable source of both confidence and learning. So, should we have only one trade opened at a time? I like your balanced and straight approach.
I get a lot of confidence from knowing that I can relay on Nial’s teachings. Finaly I am heading in the right direction. The article is very illuminating, very necessary knowledge for starters like me, thank you for what you do. I am reading all these articles like my life depends on them and getting great insight! Dear,Nialit isa very good lesson,i think by following this ican imrovea lot.
Great Lesson Nial, It’s really a big help for a newbie like me. I know this is supposed to be basic stuff Nial, but I have been working on my TP for over a year now. Maybe my brain just needs a little time to absorb and process. I had to go through some cathartic training to see the true pearls of wisdom you have exposed in this article. All my mistakes are been pointed out in this articles. Your insights into how a trader’s emotional state can affect one’s trading ability is very important.
Thanks for reminding us because I think we slip away from this self-awareness when we get too involved with other things. After reading these thought provoking articles, I now feel that I have found right track and clarity to do the forex trading. Because the things are explained clearly and in a easy to understand way. It’s either you or I’m just ready to hear it anew and believe and ACT ON IT! I think this sight is great.