Forex Trading Plan

A forex trading plan is one of the elements that separates professional forex traders from newbie traders and it often spells the difference between success and failure. A forex trading plan contains details of specific decisions a trader would need to make while trading such as what lot size to use. Our forex trading plan below reveals that at the end of 22 weeks (i.e. about five and a half months of trading with an initial balance of $200, a forex trader would have withdrawn a total of $87,687.50 with an account balance of $48,600 left for trading and a potential for withdrawing $27,337.50 every two weeks. This calculation is based on a weekly net profit of 200 pips trading an instrument whose pip value is $10 per standard lot. How's that for financial freedom? Note that the leverage decreases with increase in volume of trade - 400:1 for 0.1 to 3 lots, 200:1 for 3.1 to 10 lots, 100:1 for 10.1 to 50 lots & 40:1 for 50.1 lots and upwards - as obtainable on the CMSFX VT Trading Platform.

Week Account
Balance		 Risk
Capital
(12.5%)		 Lot Size PIP
Value		 Net Profit
(200 pips
per week)		 Equity Withdrawn
1 $200 25 0.1 1 200 400 $0
2 $400 50 0.2 2 400 800 $400
3 $400 50 0.2 2 400 800 $0
4 $800 100 0.4 4 800 1600 $800
5 $800 100 0.4 4 800 1600 $0
6 $1,600 200 0.8 8 1600 3200 $1,600
7 $1,600 200 0.8 8 1600 3200 $0
8 $3,200 400 1.6 16 3200 6400 $3,200
9 $3,200 400 1.6 16 3200 6400 $0
10 $6,400 800 1.6 16 3200 6400 $3,200
11 $6,400 800 1.6 16 3200 9600 $0
12 $9,600 1200 2.4 24 4800 14400 $4,800
13 $9,600 1200 2.4 24 4800 14400 $0
14 $14,400 1800 3.6 36 7200 21600 $7,200
15 $14,400 1800 3.6 36 7200 21600 $0
16 $21,600 2700 5.4 54 10800 32400 $10,800
17 $21,600 2700 5.4 54 10800 32400 $0
18 $32,400 4050 8.1 81 16200 48600 $16,200
19 $32,400 4050 8.1 81 16200 48600 $0
20 $48,600 6075 6.1 61 12150 60750 $12,150
21 $48,600 6075 6.1 61 12150 60750 $0
22 $60,750 7593.75 7.6 76 15187.50 75937.50 $27,337.50
  $48,600            

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With the forex trading plan above, the forex trader alternates between making a withdrawal from his forex trading account at the end of every 2 weeks and increasing his trading capital otherwise. The trader only has to earn an average daily profit of 40 pips from Monday to Friday to be successful and many will agree that this is easily achievable. So, after at most 6 months of currency trading, the forex trader would have grown his or her income to nearly $60,000 per month.

The only problem with the above trading plan, however, is over leveraging. It may be very difficult to succeed with that level of leverage. Nevertheless, discipline is the keyword for trading your plan successfully. 'Plan your trade and trade your plan', so the saying goes. The following are pertinent success factors to consider in order to realize the plan above.

  1. Volatility: A volatile market provides greater profit potential than a quiet market. Bollinger bands is an excellent technical indicator of volatility. If you want to be sure of making profit, avoid trading when the Bollinger bands are contracting.
  2. Trend Analysis: A trending market provides greater profit potential than a ranging market. Always trade in the direction of the trend in order to avoid incurring losses and wasting your time with unprofitable trades that tie down your trading capital . As they say, 'the trend is your friend'. Moving Averages are an excellent technical indicator of trend and is discussed under FX trading strategies.
  3. Market Entries and Exits: The points at which you enter and exit the market determine whether you make a profit or loss and how much. See FX trading strategies and FX trading signals to learn how to enter and exit the forex market.
  4. Risk Management: Forex trading carries a high risk of financial loss just as there is a high potential for financial reward and so, applying risk management measures is essential for success. When starting out, it is best to limit your choice of instruments and open positions to one and never risk more than 10% of your equity per trade. Always generate rule-based trading signals before opening a trade. For more information, read our article below titled 'Profiting In An Uncertain Currency Market'.

Read Our Articles!
Profiting In An Uncertain Currency Market
Self-directed Vs Automated Forex Trading
How To Trade Forex As A Newbie

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RISK DISCLAIMER!
1. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
2. Unless where explicitly stated or implied, links to third party websites especially via ads displayed on our website do not amount to recommendations from InvesticsFX.com. Click on ads at your own risk and always exercise due diligence with the use of information you obtain from third party websites.