Steps to Build aSuccessful Trading Plan
None can go on hiking without a map because it is not a better practice and in Forex trading jumping into the market without a comprehensive plan can be regarded as a suicidal attempt. There are many gold mines and pitfalls in the FX market, and newbies may lose them if they do not have any idea about their business journey from the beginning. In this writing, we will show you how to create a bulletproof trading plan and how can investors apply those crucial strategies in the real market to get the best result within the least possible effort.
Before jumping towards business, the main goal should be the assessment of the potential risk beforehand because risk management affects deeply on the perfect trading strategies. Based on the tolerance of the risk, experts divide it into two categories, and those are i) Risk-averse and ii) Risk tolerant.
i) Risk Averse
Risk-averse traders do not like taking a large amount of risk and try to make a small profit so that losses can be under their control. They keep in mind that the higher risk can increase their potential loss, and it will be the best practice if they try to grow their account steadily, taking a slow pace. Know more about the safe approach at trading here. Soon you will become good in the trade execution process. Study the market dynamics and it will change your career and help you to become a successful trader in Singapore.
ii) Risk tolerant
Risk tolerant traders hold the opposite behavior of the risk-averse traders, and they are very reckless to take the risk in an aggressive way. Surprisingly their potential profits are higher than the risk-averse businessmen, but it does not mean that there are free from the loss. Sometimes they lose all because of their daring and whimsical desire for huge risk-taking for the highest gain.
Keeping a trading record
Elite Forex businessmen keep a trading journal as a written record and note down the incidents of buying financial instruments according to dates. They also include the position size, entry or exit points and the results of their applied techniques in this journal which help them to upgrade their business strategies in future.
This historical record proves as a useful tool to minimize the potential losses by overcoming the previous mistakes. Experts believe in maintaining a diary-like this bar investors from taking any whimsical decision and devise the goal perfectly. An investor seat to write this diary on weekends or at the end of the months and evaluates his journey if it is bringing any fruit or not.
Measuring the strength, weakness, opportunity, or threats can help to build a well-round business plan though no plan can completely be loopholes free. Professional businessmen keep more than one trading plan so that they can be prepared for all types of situation. Sudden change in the market cannot demotivate them, and they keep trust in the longer time-frame by setting a stop-loss order point in advance.
Calculation of the risk to reward ratio
Forex experts build their trading plan based on a perfect risk to reward ratio and buy the financial instrument based on 1:3 ratio so that market volatility cannot plague their business in future. The best traders always maintain a ratio less than one so that if their profit target is higher than $30 and SL level is $10 away according to the current price, then their risk to reward ratio would be equal to 1:3 which indicate an individual businessman is taking the risk of 1 dollar to make 3 dollars.
Financial markets are interconnected, and a perfect plan generally works well in every market if it is made based on practical case studies. To utilize plan in the Forex market successfully, beginners must try to gain technical skills and do the fundamental analysis effectively.