In forex, a solid trading plan will define how you enter and exit trades, how much you risk per trade, and what adjustments you should make. Having one will help you keep track of your trading progress better and it will help you avoid mistakes, but it requires a lot of discipline to stick to the plan. Fortunately, enough practice and screen time will equip you with the self-control needed to follow your trading plan.
In particular, a forex plan can be your best tool in making decisions while trading. You should be able to identify the various scenarios that could take place so that you can plan in advance what you will do in each situation. With that, you will simply have to follow your action steps instead of being confused with several emotions when something that you didn't expect happens. This will help you avoid panic or the fear of losing from complicating your decisions.
Aside from that, having a plan while you trade will help you identify which factors help you attain wins and which factors prevent you from making consistent profits. In doing so, you can decide to stick to those rules that make good results and adjust or discard those that don't. To be able to do this properly though, you need to keep a detailed trading journal that contains your trading decisions, adjustments, and results.
Another thing to remember is that, if your trading strategy isn't giving you good results, you need to be able to figure out if this is a result of a bad plan or poor discipline. If it's the former, then you need to consult your trading journal to identify which parts you need to adjust. One way to speed up this process is being able to distinguish justified from unjustified wins. The justified win is achieved when you follow your trade plan with enough discipline and you win the trade. The unjustified win is made when you don't follow your trade plan but still manage to win the trade. This evaluation should be part of your trade journal.
If you already have a good number of trades that you can evaluate, you can be able to tell if your losses are a result of a weak trade plan or poor discipline. In particular, having more justified wins that you have enough discipline and that your trading plan is working. However, if you have more unjustified wins, you need to make some adjustments in your current trading plan.
Reasons Why Forex Traders Need A Trading Plan
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