Why Have a Trading Plan?

Uh oh! You’ve learned so much and have come so far in your education, and yet you're still haven't graduated high school. No, you’re not dumb, BUT you didn’t have a trading plan.

Our point is that you can fill your mind with plenty of information, but without a good trading plan and the discipline to stick to it, you will NEVER be profitable.

Think of your trading plan as your map to success. It will be a constant reminder of how you will make money in this market. Of course it’s not required, and if you can make your living by trading without a plan, we will bow down and hail you as the Market Zeus of the Forex.

So you CAN trade without a plan if you want, but before you make that decision, let us give you a few reasons WHY you should have one.
Why Have a Trading Plan?
Reason 1: It keeps you in the right direction

Consistency is very important to have in your trading routine because it allows you to truly measure how successful you are as a trader. If you have a sound trading system but always break your rules, how can you ever really know how good your system really is? Your trading plan will keep you on target. Read it every day and stick to it.
Reason 2: Trading is a business and successful businesses ALWAYS have plans

I have never seen a successful business not start out with a plan. Do you honestly think Walmart was just created on a whim and then magically became successful? Or what about McDonalds? I’m sure almost anyone can make a better hamburger than McDonalds, but the difference between them and the individual is that they have a successful business plan that guides them to success.

In the same way, you can relate the McDonald’s story to your trading career. Whether it’s by luck or experience, everyone can make money in the forex. However, the difference between a losing trader and a successful trader is the PLAN. If you have a good trading plan and you are disciplined enough to stick to it, you will be successful!

Now you know why you should have a trading plan. Let's find out what makes up a trading plan...

CURRENCY TRADING

The Currency trading market is a multi trillion dollar market where world currencies are exchanged back and forth on a daily basis.

How is currency trading done?

Retail currency trading is typically done through brokers and market makers. Traders can place trades through their brokers who will in turn place a corresponding trade on the interbank market.

Why do currency values change?

Currency values can change for many reasons. Sometimes they react to political and economic news, sometimes they are driven by speculators, and sometimes they are driven by international business flows. If companies in the United States are importing large quantities of products made in Europe, they will need to exchange their US Dollars for Euros to pay for the products. When this is done in very large quantity over a short period of time, it raises the demand for Euros and the value of the Euro versus the US Dollar increases. This happens because dollars are being sold on the open market, while Euros are being bought.

Is currency trading risky?

Currency trading can be very risky. Currencies tend to be very volatile compared to other markets. The real key to success with currency trading is to use conservative risk management. There are many components to effective currency risk management, but the bottom line is to use caution and have a trading plan.

Who trades currencies?

Currencies are traded by individual retail investors, financial institutions, and corporations doing business. Retail investors and banks are trade to make profits and corporations usually trade in the normal course of the international business process.