Trading Plan

For every business, there is a blueprint, a plan. The business plan will provide the following:

• Executive Summary of the Company
• Market Analysis
• Organization and Management
• Service or Product line
• Marketing & Sales
• Financial Projections
• Funding requests

The business plan forms the essence of the company. Before execution, there has to be a certain amount of analysis, deliberation and planning. Things need to thought about, discussed in length and finally refined. That paves the way for improvement and evolution of ideas. It has to become so internalized that it becomes second nature.  

It is exactly the same for trading in the forex market. Before you place a trade, you have to spend a certain amount of time analyzing, deliberating and planning. Without a certain amount of backtesting in the forex market, you may not have the confidence in your trading method. Without confidence in your trading method, you may end up jumping from one method of trading to another. That is the number killer for most retail traders. 

Did you know that successful traders win only 6 out of 10 trades?
Did you know that aspiring traders want to win 10 out of 10 trades?
Did you know that successful traders care more about money management than winning trades?
Did you know that aspiring traders care more about the winning trades than money management?
Did you know that successful traders focus on the set ups and not the money?
Did you know that aspiring traders focus on the money rather than the setups?    

What is your plan as a trader?
How do you see the market?
What is your winning ratio?
What is your risk per trade?
What is your maximum drawdown?
Do you change trading methods every week or month?
Do you close your trades after 10 pips because you are scared to let your profits fun?
Do you win 3 trades and lose all the profits after 1 big loss?
Do you often let winners turn into big losers?
Do you put stop loss?
Do you hope that price will go back to your entry, and thus keep widening your stop loss?
Have you closed a losing trade after holding it for so long, and later see price going back to your entry price? 
How successful are you in trading?     

Answer these questions as honestly as possible. Just as a business plan has to remain consistent, so does a trading plan. One cannot change plan every few weeks or months because of a few losses. One has to see the bigger picture and accepts small losses. Trading has to remain as objective and as emotionless as possible. And a trading plan will help you to remain confident and assured that you will be consistent in the long term.