One of the principal ingredients of success when trading forex is developing a good trading plan. This set of trading rules, criteria and guidelines should lay out in sufficient detail exactly how you will decide when to trade and when to stay out of the forex market.
The main advantage of having such an objective and well thought out trading plan is that it can allow you to overcome the considerable temptation to allow your trading psychology and emotional responses to the trading process to take over and start directing your forex trading activities.
Furthermore, the objectivity and clarity that a good trading plan provides can be a real boon when needing to make quick trading decisions to take advantage of opportunities that may arise in the often fast moving forex market.
Avoid Circumventing Your Trading Plan
The aforementioned benefits to having an objective and proven trading plan can more than compensate over the long run for the time it takes to develop, test and then implement a decent forex trading plan.
Nevertheless, even armed with this understanding and a good plan for trading, some forex traders find themselves short circuiting their own potential trading success by circumventing the decision making process laid out in their plan.
Such a failure on the part of a forex trader to follow their own trading plan can easily be a cause for the eventual demise of their trading account.
Circumventing the protections placed into your trading plan might arise from the emotion of greed, especially in the case of failing to take profits appropriately. Alternatively, it can be influenced by hope in the case of failing to cut losses when the plan advises that the right time to do so has arrived.
Since your trading plan was developed to protect you from losses in the process of maximizing your potential profits, failing to implement your trading plan faithfully can cost you a considerable amount of money - perhaps even your whole trading account.
Emotions Can Create Havoc When Trading Forex
While circumventing the rules in your trading plan may not seem that serious a transgression, many traders have lost their entire account because of exactly this lack of discipline. Once discipline is lost when trading, the trader will then be much more likely to trade emotionally and can potentially incur devastating losses as a result.
Since trading forex on a live trading account is a serious endeavor with a real risk of loss, as well as profit, most people who attempt to trade end up getting a rude awakening if they are not prepared to handle its considerable emotional stress factors.
Primarily these psychological stresses arise from the complex emotional interplay between the fear of losing money, the hope of avoiding accumulated losses and the greed involved in wanting to make more money.
Accordingly, for the best chances of success when trading, remember to prepare yourself before you begin to trade by planning your trades objectively and then proceeding to trade your plan as strictly and calmly as possible.
Stick to Your Trading Plan For Optimal Success
In essence, if you went to all of 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 that is intended to protect both you and your trading account would tend to beg the question of "why are you trading to begin with?"
Losses of trading discipline may also be a sign that you are not yet consciously or unconsciously psychologically prepared for trading forex. Basically, forex traders generally require considerable personal discipline for the best chances of success in the long run.