You are sick of your job and you desperately want a break from your day to day life. So, you decided to go camping for a change. The previous night, you packed your bags and other stuff you need. In the morning, you put your newly bought tent on board, put on your seatbelt and started driving. But while you are driving, you felt like something is missing. It took you a moment to realize what you forgot.
Even though you have a destination in mind, you don’t know the route to your camping site. Fortunately, thanks to GPS you didn’t have to worry much.
All you need to do is put in your desired destination and the GPS will do the rest by working out the route for you. Technology to the rescue!
Now let’s change the scenario to Forex trading. You have the potential to start a career in Forex trading and you have all your backup. You have done the market research and even had a demo account to practice with.
Now you have finally found the courage to start trading and make some profit.
But, what’s now? What do you need the most at this moment?
You’ve guessed it! You need a trading plan to reach your destination!
Why you need a trading plan?
1.To minimize the rate of loss
If you ever follow the trading pattern of successful traders, you will observe that they all have their own trading plan. Those who are trading bonds for a long time, know the importance of trading plan. You can also know more about trading strategy by using Saxo’s free resource. Visit their website and enhance your skills like the professionals in Hong Kong.
When you first start your trading, you first need to set a fund that you want to trade with. This trading fund can never be your essential fund. This is because, even if you fail to make a profit at the beginning, you don’t have to worry about your essentials.
2. Risk and reward ratio
After fixing the trading fund, risk and reward ratio is to be calculated based on the percentage of risk you decide to take. If you have clear idea of the Forex market, it becomes clear how you will calculate your risk to ratio reward.
3. Helps with fixing priorities
Following a trading plan is very important because it helps you to understand your priorities better. It cuts off unnecessary workloads and makes a trade more user-friendly.
There are no certain rules or a particular plan that a trader needs to follow. Trading plans are always customized and are planned in a way to create scopes for gaining profits.
4. Earning a profit
We all have to remember that the most distinct feature of the market is that it is frequently fluctuating. To speculate this fluctuation, traders often use trend lines to keep a note of the price variations.
That’s why most traders tend to adapt to newer strategies because, in reality, all the trends come to an end. To gain a profit, traders often use various strategic plans in their trades to get the most desired result.
5. Long term success
If you trade in a planned way, you will find the process to be easier than when done in an unplanned way. Moreover, all the steps to be followed while trading become crystal clear and your trading falls into a systematic pattern.
This is like a habit. Once you get used to it, trading becomes easier and more fruitful.
Again, since the same plan is followed over and over again, the chances of losing lessen.
6. Predicting the exchange rate
When you trade in a planned manner for a long time, you tend to predict what happens next and what will be the outcome. This ultimately prevents you from making the wrong decision and you can carefully decide this while studying the market.
A trading plan also helps in setting a goal before you start trading. Once you have a goal, you’ll know your limitations as well as increase your work potential in Forex trading.
Undoubtedly, no trading plan can assure you a 100% profit, but if you have the right plan in action, you’re sure to win!