Strategy is the foundation to success. If you are new to the forex world, the first step is to create a trading plan to guide your research and investment activities. Follow this simple 10-step guide to build the framework of your very first plan. You can then update the plan as you learn and grow.
Step 1: Self Assessment
For every new trader, it is critical to understand yourself. What are your action styles? Under what circumstance do you feel anxious? How much knowledge do you have regarding foreign exchange? Is there anybody in your circle who can support and guide you along the way?
Step 2: Getting the Mindset Right
Once you’ve conducted an overview of your knowledge level and accessible resources, it’s time to prepare your mindset. An effective trader understands they must stay calm under all scenarios and never let greediness drag them by the nose. Build a mindful reflection system so you can keep your mind in check.
Step 3: Understand Your Risk Tolerance
The third step is a risk analysis. How much risk can you tolerate? If you have a modest budget, your trading behavior would naturally differ from those with larger sums of funds at their disposal. Also, understand what it means to you if you suffer loss. How severe of a consequence would it bring?
Step 4: Create SMART Goals
Set goals that are realistic, trackable, and defined by a timeframe. You should create both short and long term goals, too.
Step 5: Research, Research, Research
At least half of forex trading goes into your research because many factors could easily impact a currency’s value. Therefore, ample research allows you to respond to price changes in time, if not in advance. Experienced traders can thus make decisions by predicting a price surge or drop.
Step 6: Get Ready for the Trade
You need to find a reliable broker and go through the basic identity verifications before starting the trade, even if you’re not investing with real money yet. This process should also cover your tax paperwork and any other documents your country requires you to submit. Remember: a credible broker could help you stay legal, compliant and will keep you supported.
Step 7: Stop-Loss and the Exit Strategy
Having an exit strategy is critical. Start by defining a stop-loss trigger — at what point do you pull out regardless of future potential? Your exist strategy should also mark the sell triggers so you can stop at the right time and walk away with profits.
Step 8: Entry Rules
Once you have your way out covered, it’s time to think about your entry points. This is the level or price you need to initiate a buy or a sell.
Step 9: Your Documentation System
Next, create a system to record all your activities and results. In forex trading, it is vital to keep track and analyze your overall performance for improvements.
Step 10: Create Your First Account
Now that you’re ready create your first account. If you’ve never done forex trading before, you should start with a trial account that doesn’t work with real money.
Build Your Trading Plan
Follow this guide and build your first forex trading plan, and continue to learn and grow. Also, it’s best to write it, so you have a physical copy at hand.
