This article looks at the currency trading plan that you need to have when you trade.
When you set up a currency trading plan you are going to be creating a set of rules that you use when you trade. There are a number of points that you have to look at when you are setting up the currency trading plan. If you do not set up the currency trading plan correctly then you will not be able to get all the benefits that come from the use of a trading plan.
The Market You Will Trade In
The first point in your currency trading plan is the market that you will trade in. Most traders assume that they are going to be using the forex market. However, there are three different markets that make up the forex market. This is the spot market, the futures market and the options market. Most traders will use the spot market because this is the one that retail brokers connect to. Outlining which market you are going to use is the first step in setting up your forex trading plan.
The Timeframe for Currency Trading Decisions
There are a number of different timeframes that you can use on the forex market. In your currency trading plan you need to consider which timeframe you are going to be using to make your trading decisions. This timeframe is the primary one that you are going to be trading in because the timeframe where your decisions are made is the timeframe that you are going to be working in.
The reason why you have to state which timeframe you make decisions in is due to the fact that you can use multiple timeframes to trade. There are many traders who will use one timeframe to make their trading decisions in and another to determine the entry and exit points they are going to use when they trade.
The Indicators and Settings of Your Analysis
The third part of your currency trading plan should cover the indicators and settings you have for the analysis that you are going to compete. There are a number of indicators that you can use when you trade, particularly if you are looking at technical trading. You need to choose which indicators you are going to be using and outline them in the trading plan that you have.
Once you know which indicators you are going to be using you need to detail the settings that you are going to use. This is also something that affects technical analysis more than fundamental analysis. The indicators that you apply to the forex charts will have certain settings to ensure that they work in the correct timeframe. You need to make a note of this in case anything where to happen to the charts that you are using.
The Rules for Position Sizing
When you look at position sizing you are going to be looking at the dollar value of the trade that you are going to complete. This is something that you have to detail in your currency trading plan. When you detail this you can ensure that all of your trades are done within your risk capacity.