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It will probably be heard before any operator forex trader should have a trading plan for profits and should follow. I’m telling you here again, but I will explain how to actually proceed to design the plan and how to follow it exactly. Many traders make the mistake of simply trying to put something on paper as a guide. This is an admirable goal but the real reason why a trading plan success (which is always a trading plan in writing) is useful is because it is the act of designing a customized plan that leaves in the mind of a trader the “why” and not just the “how”. Knowing “why” you are doing what you are doing, instead of just knowing how, is the key to avoid common mistakes in trading.
Some people think that only the day traders need written trading plans. In fact, they need all types of traders.
It is very important to note that many traders come to a point where analysis is pretty good: good enough to know what instrument should negotiate and in which direction. The problem is that, although you can expect this to be enough, not enough to make money, at least not for most people, because they fail in execution. It is in overcoming the final hurdle for the implementation of the entry and exit of positions where the trading plan is truly useful.
Initial questions forex trading
1. What is the “advantage” that will try to use to make money? Do you think that the Forex market direction can be predicted? If so, how? Will you use tracking the trend, mean reversion or some combination of the two strategies? Will you use the fundamental data and market sentiment or just pure numbers?
2. How much money can afford and want to trade Forex risk by trading plan?
3. What is the best forex broker for your account size, country of residence / citizenship and trading style?
4. What will be your risk management strategy? What will build your stop loss?
5. Make some kind of back test that covers many years and calculate the best, the worst and average cases for your trading account. Can you handle the worst case?
ADJUST YOUR RISK IN A POSITION BASED WORSE THAN THE WORST CASE THESE RESULTS FROM YOU.
6. What currency pairs will negotiate? How many operations will be open at the same maximum time?
7. How much discretion will be allowed in the selection of currency pairs, opening positions and leaving them? This is very important. How much will be based on fixed rules?
8. Will you manage open positions? If so, how?
9. How much of your time will be devoted to the negotiation? Will it be a day trader, swing trader, position trader, or some combination of these types of forex traders?
Once you have thought about and answered these questions – and you should devote attention and considerable work – should be able to start writing your trading plan success, which must be completely comprehensive and provide a good and reasoned response to every possible question.
Wording Your Forex Trading Plan
Your trading plan should cover all this in writing. A winning trading plan should contain the following points:
1. How will you decide which pairs negotiate?
2. The maximum risk positions can be open at any time.
3. The limits on daily, weekly, monthly or has decided to apply (for example, once lost 0.50% of the account balance in a single trading day, stop trading for the rest of that day losses ).
4. Entry strategy in trade, including the position size and stop loss.
5. If you control the open positions actively or not.
6. Exit strategy trade.
7. If you intend to use your own judgment, what prices will follow, that is, if the price trading above 1.1000 for one hour, consider removing half the size of the position, but if not so, keep the open position normally.
8. How often will review their positions and your trading plan? This is very important because no plan should be static.
Review of Your Trading Forex Plan
At the end of each trading session, if you are a day trader or end of each week in another case, you should take notes, focusing on how well it has been adjusted to the plan and if the “plan of winning negotiation” has covered Everything that happened. Were there times when you were not sure what to do, was very confused and not just undecided? If so, then your trading plan should be amended to implement these eventualities. In addition, it is possible that parts of his plan sonasen good in theory, but prove too difficult or painful emotionally to implement in real time with real money. Think much if there is an easier way to do things. Losses are inevitable in trading forex, but can be controlled to some extent.
Second, you should be aware of your winnings or losses. They are much worse or better than suggested by the back test? If so, why do you think that is? Work in solving the problem. A winning trading plan, after all, is the one who reports profits in the long term. It is vital that traders constantly work on reviewing and improving its operations. It is a fundamental habit of all forex traders that make profits consistently.