Wednesday, June 3, 2009

Create a trading plan, and stick to it!

One of the many valuable lessons I've learned so far in FOREX trading is that it is really necessary to create a trading plan and FOLLOW it!
How else can you see what you did wrong and correct it? If you don't have a trading plan you are pretty much gambling and trading Forex wouldn't be any different then going to any casino and placing a bet on the Black Jack tables. You might be lucky and pick the right move. Does that make you a good FOREX analyst? Absolutely not! How would you repeat a trade like that if a similar trade opportunity would appear? For awhile there I made one 'good' trade after the other but really not knowing why certain moves in the market happened. It was purely based on technical analysis. If you would've put me on Mars and give me a laptop with any currency to trade (with an oxygen suit) without access to any other news source it would've have the same result. Ok, this is maybe a bad example since I did pretty well on all the trades and second, there's no way in hell I'm going to Mars doing Forex. Ehm, doing anything actually.
To get back to the point, you want to focus on the long run, the bigger picture. It's nice to have some successful trades going for you right now, but would you be able to sustain this on a regular basis, and I'm talking about a few years from now.
When creating a trading plan, no matter how horrible it may seem for anyone else, it's YOUR trading plan. Remember, nobody is perfect on Wallstreet or Forex, if that was the case we wouldn't be in a financial crisis right now. Your trading plan will be at work during Forex hours. If it doesn't do well, go back and try to analyze it why it certain things happened and try to tweak your trading plan for next week.
See it as a car you can fine tune after losing a race so it can do better next time.
There are a few trading ideas website out there, from basic to expert strategies you can apply in real life (or even better a demo account, so you won't lose any real money if things turn sour).
My trading plan I described right here, but it not even far from perfect, I'm still working on it. I'm tweaking it once in awhile, but the hard factor is to actually stick to it! Many times I catch myself trying to jump into the market before it's even time for it to do so according to my trading plan, just to catch a few pips extra, but believe me, it's not worth it. Patience is key! Wait until a good trading opporunity arises, if the entry strategy of your trading plan tells you to enter, do so, if not don't try to outsmart the market by entering earlier. The market is king, and does whatever it wants to do. You just try to follow it and and hopefully gain some money from it by predicting where it wants to go.
That's what I learned about Forex strategy plans so far. I was a dummy sometimes letting my emotions go and try to take 'revenge' on the markets by after every losing trade sell or buy for a higher or lower price then the previous close that would put me out!
A website worth while researching about different trading strategies is, it gives you basic info about several simple strategies or more complex ones using different indicators, all useful to create a plan. Now remember you can always tweak an existing plan according to your own trading habbits. But no matter what happens or how tempting it may seem, STICK TO THE PLAN!

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All opinions expressed, trade recommendations/advice on this website are solely of John van der Munnik and are not affiliated with any investment firm or any other organization. You should not make an investment only based using this website VDM Trading for your trading needs without seeking help from your own financial advisor.