A trading plan is a formal document that outlines a forex trader’s strategy, including the trading system, risk management, trade rules, money management and many other details. A trading plan is used to guide a trader’s actions during times when emotions can lead to bad trades or poor decisions.
Although coming up with a trading plan involves outlining the trading system, the two are distinct. The trading plan outlines what a trader expects to get out of forex trading and what needs to be done to achieve that. The trading system is one of the elements within a trading plan that will help the trader meet those expectations.
A trading plan is a primary part of a trader’s personal feedback system. By keeping a written plan and a trading journal, a forex trader can compare his actions to the stated plan and identify areas for improvement.
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