Having goals set in advance and knowing when to get out of a trade make up an important part of successful forex trading. Remember, a trade must be liquidated in order for a profit to be realized.
Basically, trading is a business and should be treated as such. Since going into business generally requires a business plan to be successful, it should not surprise you that trading also requires a plan for the best performance.
Furthermore, since most business operators need to practice good money management to stay in business, so do forex traders.
Come up With a Trading Plan
Most successful traders who want to stay in business over the long term develop trading plans that usually contain certain key elements that create an overall objective way to trade and that thereby help the trader avoid being at the mercy of their emotional responses and trading psychology.
For example, these plan basics might include a description of the process used to size positions, in addition to specifying how to choose when to enter into a trade. A good trade plan should also cover how the trader will go about taking profits and limiting losses on trading positions.
In essence, trade plans lay out the trading process in a series of steps and criteria for the trader to follow. Nevertheless, just going through the process of developing a trade plan can help a trader learn good trading habits since they usually need to research how successful traders trade forex market.
This means they can often figure out the techniques that have worked for other traders before they start to put their own money at risk.
Successful Traders Follow Their Plan
Basically, if you went to the time and trouble of developing a decent trading plan in the first place, the least you can do is follow it when trading.
Not following your own trading plan would tend to beg the question of "why are you trading to begin with?"
While this may not seem that serious a transgression, many traders have lost their entire account because of a loss of discipline. Once discipline is lost, the trader will be much more likely to trade emotionally and potentially incur devastating losses.
Basically, trading is a serious endeavor, with most people who attempt it getting a rude awakening if they are not prepared to handle its emotional stresses.
Accordingly, for the best chances of success when trading, remember to prepare yourself before you begin to trade by planning your trades and then proceeding to trade your plan.
Keeping a Trading Journal
In addition to the trading plan, a daily journal of trades makes up another extremely useful tool for a forex trader to help them further hone their talents.
Keeping a journal of all of their trading activities allows the trader to look back at both winning and losing trades to determine what went right with the winners and hence should be repeated, as well as what went wrong with the losers and hence should be avoided.