The title of the post might seem a bit odd to you. It might instigate you to question why to develop a less vulnerable plan, why not an invincible and undefeatable plan? It’s because when it comes to Forex trading, nothing can be really invincible.
No plan, not even the ones created by the Wall Street geniuses, can yield successive profits for a long time. Even plan sets to fail, no matter how much product they are. The best ones just trigger less failure than most others. This post will venture through the process a trader can use to develop a trading plan, method, or strategy that fails less.
Definition of a Trading Plan
It is at its very core a framework that navigates traders through all the nooks and corners of a trading process. It sets the rules and regulations which traders abide by for entering or exiting trades, identifying market conditions, and managing risks along with the proceeding of a trade. A trading plan always ensures reliability and accountability and keeps people concentrated on their individual strategies.
Developing Process of a Trading Plan
Let’s not beating out of the bush anymore and get right into the eye of the storm. Let’s learn how to build a more effective trading method.
Define Your Analytical Approach
Your analytical approach must mitigate some requirements like enable you to recognize trade setups. The approach may involve a combination of trend lines, Fibonacci levels, chart patterns, trend lines, Ichimoku clouds, moving averages, Elliott Wave theory or the fundamentals, etc. If you are new to this approach, you may use the demo account from Saxo bank group and develop your basic skills.
The initial focus of a trading plan is to help traders to condense their focus on different scenarios that the trader gets to be comfortable with. After building that basic framework, traders can watch out for risky trades and look out for optimal opportunities.
Choosing the Favorite Trade Set-Ups
A trading setup remains at the core of an ideal trading process. To establish one, traders need to think of an analytical approach first as it triggers an ideal trading setup. For instance, think of a consolidation pattern or chart pattern that makes traders take certain subsequent actions providing signals and indications. Basing on those signals, traders will decide how to deal with a certain market condition. Such setups are mostly based on factors that drive traders to shape their trading approaches into more profitable ones.
Focusing More on What Matters
When a market participant remains in his initial phase, it’s somewhat crucial to them to limit the market numbers to focus on. Every market shifts and doesn’t remain the same forever. When a person plans for just one market, it helps them understand that one place better. He can conceptualize all the possible happening and patterns that different trading waves make. He can even concentrate on a particular timeframe on one market to get familiar with the movements and characteristics.
Contemplating on the Holding Period
Time frames will mostly rely on a trader’s chosen style to approach the market. People who prefer short-term trades such as scalping, day trading, or medium-term approaches like swing and long-term trading like position trading get defined by their given time window to close trades.
Realizing the Risk Tolerance Capability
Each step in the building of a trading plan is equally crucial. And no plan can get complete without incorporating a solid risk management strategy. Your risk management strategy will navigate your judgment to detect a potential threat, it will provide you a real understanding of the situation going on around you, and it will provide instant solutions while facing a challenge.
You have to remember that the primary objective of a trading plan is to discipline the entire trading process. Step out of anything that threatens that discipline. Because when your discipline get compromised, nothing else doesn’t work.