Let’s recap very quickly the items required to create both a forex trading plan, as well as a trading journal. Follow this list to create your trading plan and journal, and you’ll be sure never to lack an important piece of the forex trading planning stage.
Trading Plans
Goals – Make your goals clear. An example of a good goal for a trading plan is “to grow my account by 5% per month,” or “produce 10 pips per week day.”
Risk – Make your risk acceptance very clear. A good risk plan includes 1) how you plan to limit your risk 2) the amount of money you will place in each trade. For example: “I will risk 1% of my account balance per trade, and seek a profit of 2% on each winning trade.”
Trade methodology – It is a necessity that forex traders write down how they intend to enter and exit trades. Include your analysis techniques, the amount of time to hold a trade, when you plan to exit each trade, as well as when you plan to enter. The idea here is to solidify your rules-based trading plan into words. For example: “I plan to trade the EUR/USD pair. I will buy when the 5-period simple moving average crosses over the 25 period moving average on the 30 minute chart.”
Forex Trading Journal
Your forex trading journal is a log of all trades you make. Include the following information with each trade:
• The price at which you entered the trade
• How you feel about the trade
• The catalyst for the trade (a moving average cross, or weak employment report, for example)
• Whether or not the trade was part of your rules-based trading plan.
• Your profit or loss.
By keeping a log of your forex trading history in a forex trading journal, you’ll be better prepared to take on the foreign exchange market. Furthermore, you’ll have a point of reference if at any time you want to review your trading plan to make changes to increase profitability.
Never, ever skip out on making a trading plan or trading journal. Two famous quotes should be encouragement to create a trading plan and journal:
Failing to plan is planning to fail.
Insanity is doing the same thing over and over again and expecting a different result.
