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plan-picDevelop your own Forex trading plan..

Having a Forex trading plan is one of the most important pieces of the puzzle of becoming a consistently profitable Forex trader. Yet for many traders, creating a Forex trading plan can seem like something of a mystery, or perhaps something that they “will do eventually”

It is this lazy type of thinking that gets many traders into trouble and causes them to blow out trading accounts. Success in the markets is a function of discipline, and most people simply do not have enough self-discipline to determine if they are trading emotionally or objectively. This is where having a defined forex trading plan comes in; a trading plan will act as a guide which will keep you on the disciplined trading path.

Having a written out pre-defined trading plan means you are making an effort to hold yourself accountable to something, this is necessary to forex trading success because there is no one to be accountable to as a trader. You have only yourself to be accountable to when trading the markets and it can be extremely difficult to do the BEST THING FOR YOUR TRADING ACCOUNT when it goes against everything you FEEL like you want to do. This is the entire point of having a forex trading plan; to have a physical reminder of what the best thing for your trading account is at any given time…

The more you push and struggle by over-analyzing market variables the more your trading account is going to suffer, this is one of the biggest psychological paradoxes and hurdles that traders need to overcome before they can realize their full potential as market technicians. This fact is directly related to the concept that patience in Forex trading is rewarded by the market. Patience is one of the best and most important virtues that any forex trader can have. Being patient and waiting for only the “best” price action setups will greatly improve not only your win rate but also your confidence, because when you are trading with a high accuracy you are naturally going to boost your confidence.

This is all well and fine as long as you can manage to maintain your patience as your winning percentage improves. This may seem a bit counter-intuitive at first but it actually is one of the biggest reasons that many traders fail to make money consistently and end up repeating the same cycle of boom and bust in the market. The psychology behind this process revolves around the feeling of euphoria or over-confidence that often hits traders as they become more accurate in their trades, which is almost always a result of having patience long enough to wait for a string of high-quality setups.

Being able to recognize this feeling of euphoria or over-confidence and calmly and consciously over-ride it by walking away from your trade station for a period of time is the best medicine to fix this emotional trading mistake that so many traders make. There are a number of other strategies you can use to remain consciously aware of the potential of euphoria to sabotage all your trading success. If you need to make note cards and post them on your trading desk that say things like, “Be aware of euphoria after winning trades”, or “Don’t stop being patient just because I had a winning trade”, than by all means do it. The period right after a winning trade or a series of winning trades is the exact point in time that separates the amateur traders from the pros. Pro traders are always consciously aware of how they are feeling and whether or not their emotions are influencing their trading activities.

One of the best ways to not let emotions influence your trading activities is to have a defined trading plan that describes in concrete terms what you will do in any given market scenario. Many traders do not attempt to have a trading plan because they aren’t really sure where to begin or how to write one. It really does not need to be extremely long or complicated to be effective. Essentially the point of a trading plan is to keep you honest with yourself because if you don’t do it no one else is going to. And this is exactly the problem most traders have in the markets, there is no one to be accountable too if you lose all your money, except yourself. You aren’t trading for your boss or someone else, unless you are a prop trader, but most traders don’t make it that far because they cannot even be accountable to themselves first.

So what exactly does a high quality trading plan need to contain? Well it doesn’t need to be super complicated, as stated previously, the MOST important aspect of an effective forex trading plan is that you can somehow force yourself to ACTUALLY USE IT. Tape it up somewhere that you will see it every time you trade, read it every day. I have personally written trading plans in a note book only to never open the note book again. Don’t do this, don’t write it down in a note book, type it up on your computer and print it out if you need to, then place it on your trading desk, hang it on your fridge, whatever it takes so that you READ IT EVERYDAY.

What are the critical elements of a trading plan?

1. Define your entry strategy.Whether you are entering the market off a reversal pin bar setup in the direction of the trend or off a bounce of a moving average, whatever you use to enter with make sure you can define it and that you know what constitutes a HIGHQUALITY or PERFECT A+ entry from one that is lesser in quality or perhaps a B or C entry.

2. Determine the risk to reward scenario on any potential trade setup before entering it. Also, make sure you have a thorough understanding of Forex position sizing.

3. Adjust the position sizeon the trade to meet the necessary stop-loss distance, NEVER adjust the stop-loss to meet a desired position size, this = GREED.

4. Know what your exit strategy is BEFORE entering the trade, if you are not exiting on a pre-set risk reward setup, than make certain you don’t tell yourself that you will just “figure it out” as the trade unfolds, this never works. You are never going to be more objective than when you are not in a trade, therefore this is the best time to plan out all trading parameters.

5. After the trade is over, make sure your trading plan includes an activity or some mandatory thing that you do after you have exited a trade, whether it was a winner or a loser. The period of time right after a trade is one of the most, if not the most, emotionally sensitive period for traders. Feelings of revenge, frustration, and disappointment can cause you to jump right back into the market on a whim, with no real setup present, obviously this is likely to cause you even further psychological harm because you will likely lose even more money, and the cycle will continue.

Winning trades also need a period of inactivity once they are closed out. It is very easy to feel over-confident or “in control” of the market after a string of winning trades. What happens next is that traders often enter a trade on a whim again (see the pattern here) but this time they are at even greater risk because they are feeling euphoric and they decide to risk more than usual, only to see all their recent profits evaporate in the blink of an eye.

This article has supplied you with the reasons WHY you need to have a Forex trading plan and some very good ideas about what you need to include in your trading plan. There is no concrete way to make a good trading plan, but the 5 concepts included in this article are a great starting point. Feel free to add any of your own ideas or concepts presented in my forex trading course to the outline presented here. Just remember that the whole point of a trading plan is to keep you accountable and to keep you on the track of objective thinking. You should NEVER make trading decisions while you have a trade open, as MOST of the time this will back-fire on you. The best time to make your trading decisions is when you are not in any trades, this is done by creating a logical Forex trading plan that acts as your guide to the market, and this is really the only effective way to consciously make an effort at eliminating emotional trading mistakes.

nialfuller

About Nial Fuller

is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 15,000+ students since 2008.
Checkout Nial’s Professional Forex Course here.

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68 Comments

  1. James says:

    This article has renforced why i have not gone live as without a trading plan and strategy your confidence can take a big knock playing the gambling game .
    Thanks Nial.

    James London

  2. Luyimbazi says:

    Thanks Nial for all the refresher lesson you are sending to me from time to time they are an invaluable source of both confidence and learning.

  3. wilfried says:

    Thank you for this article!
    So, should we have only one trade opened at a time?
    If we trade looking at a daily chart it can take several days…

  4. Paul says:

    Solid article. I like your balanced and straight approach. Thanks for sharing your journal.

  5. Marinus says:

    Your coaching is essential in tne FX environment
    Cheers

    Rod

  6. Larry H. says:

    Nial,

    Again, in this article, you are providing us with needed “meaty” basics. Will be enrolling in your course (for the more advanced goodies) later this month.

    Thanks….Larry

  7. Shane says:

    Best trading advice I’ve read. Thanks!!!

  8. Hansjoerg Balzer says:

    This is just great advise. I get a lot of confidence from knowing that I can relay on Nial’s teachings. Finaly I am heading in the right direction. Good tradig to all of us ….Hansjoerg

  9. Guido says:

    EXCELENT article, just Ex-ce-lent!!

  10. Mike says:

    thank you for taking the time to write this great article Nial, it is excellent.
    cheers

    Mike

  11. Justice says:

    The article is very illuminating, very necessary knowledge for starters like me, thank you for what you do.

  12. Janet Bagumira says:

    I am reading all these articles like my life depends on them and getting great insight!

    Thank you Nial.

  13. Nathalie says:

    “You should NEVER make trading decisions while you have a trade open” THATS TRUE …THANKS ALOTS NIAL :)

  14. sudhansu sekhar mohanty says:

    Dear,Nialit isa very good lesson,i think by following this ican imrovea lot. thank

  15. Fauzan says:

    great lesson, thanks for sharing

  16. Mojet says:

    Great Lesson Nial, It’s really a big help for a newbie like me.
    Thanks for sharing!!!

  17. Behzad says:

    very helpful lesson again

    Thanks

  18. Steve says:

    I know this is supposed to be basic stuff Nial, but I have been working on my TP for over a year now. Maybe my brain just needs a little time to absorb and process. I had to go through some cathartic training to see the true pearls of wisdom you have exposed in this article. Absolutely brilliant NIAL!

    You seriously have my attention.
    Steve

  19. nate says:

    absolutely amazing!!!, thank you so much Nail.

  20. Abu says:

    thank you for the great article

  21. dave says:

    good indeed pls keep it on ,you said the facts ,i enjoy it.

  22. Eileen says:

    All my mistakes are been pointed out in this articles. Thanks for hilighting them out, I am going to stick to your
    suggestions. Thanks once again.

  23. Paul says:

    Your insights into how a trader’s emotional state can affect one’s trading ability is very important. Thanks for reminding us because I think we slip away from this self-awareness when we get too involved with other things.
    Thanks.

  24. joaquin says:

    excellent article!!

  25. Sri says:

    I am going to make a nice book of all your articles and read them over and over until they are permanently ingrained into my brain:)

  26. ABDUL says:

    After reading these thought provoking articles, I now feel that I have found right track and clarity to do the forex trading.Because the things are explained clearly and in a easy to understand way. Very good work indeed.
    THANKS NIAL.
    arasheed

  27. JOHN says:

    RIGHT ON!!IT MAKES SO MUCH SENSE. It’s either you or I’m just ready to hear it anew and believe and ACT ON IT!!

    Thanks Nial

    I think this sight is great. I still feel more connected hear but time will tell. I am just trying to decide about signing up?

  28. Wolfram says:

    Thanks for this article Nial. As a former manager and war vetran I knew already a lot of planning and discipline, but made the mistake not to write my plan down. Now i did, hope it works out.

  29. Belinda says:

    I am really enjoying reading all your articles & videos on your website. You have so much wisdom, experience & knowledge about the market.

    I have been trying to figure all this out myself and made all the above mistakes. I find it really hard to be patient for setups & like you say the greed of jumping back into the market gets me time & time again! I am hoping to join your members section in the future.

    Thank you Nial.

  30. LUKE PEACEMAKER says:

    Nial, again your a great forex phycologyst, I love your lessons you have the old me all over these lessons and are greatly helping my trades.

    Thanks Nial.

  31. Ezzywave says:

    Good advice Nial.
    I find trying to take emotion out of the trade the hardest thing about trading.
    Cheers

  32. sree hari prasad says:

    This is a serious article. Without a written out plan and the discipline to follow it, failure is sure to happen in this market. More is explained in the course. I’m currently going over my plan to make sure all scenarios are covered before I begin to trade (even on my demo account). A plan takes the emotion out of the game, and that’s very important. Thanks Nial for driving home this crucial aspect of a traders life

  33. Jose María says:

    Excelent article! Until Now after reading your article I realized and I see clearly the role of the writting plan on the trading success, It inspire me and I have done my first trading plan, thank you very much for your advice and for share your knowledge!!
    Take care.
    José

  34. destiny Nigeria says:

    Keep up the good work God bless youm

  35. Abayomi says:

    wow..! this is 1 of d best articles i’v read in recent times. it completely reflects what happened to me after having strings of winning trades, only to loose all profits when i lost on a trade which finally resulted in over-leveraging and over-trading..I’v learnt a lesson

  36. haastrup says:

    i thank you for constant upgrading and i categorically want to say that you are the best. i’ll like if i really can meet you online one of this days, i av some personal issues concerning trade to discuss with you and your advice will be welcome.i’m looking for a possitive responce from you

  37. Nial, i recently discovered your trading methodology; i must admit, it is so uncomplicated and straightforward that i do not clutter my charts any more with indicators that lag price action. its so simple and result oriented. you have earned my business; see you soon in your forum.
    yomi

  38. Butch says:

    This is a serious article. Without a written out plan and the discipline to follow it, failure is sure to happen in this market. More is explained in the course. I’m currently going over my plan to make sure all scenarios are covered before I begin to trade (even on my demo account). A plan takes the emotion out of the game, and that’s very important. Thanks Nial for driving home this crucial aspect of a traders life.

  39. Jason Tay says:

    Thank you Nial! Great article!!!

  40. Gladius says:

    Great article. Point 5 is crucial. If you lose dont lose a lesson- make analyse after winning/loosing trade.
    BR, Gladius

  41. Baskar says:

    Hi,
    excellent article, very aptly put in.
    thats just how we can be profitable in the long run in such a dynamic forex world.
    i sometimes trade the daily chart, based on ur pin bar revearsal strategy.
    thanks and keep posting,

  42. seb says:

    excellent lesson mate! priceless this stuff….

  43. Jeff says:

    Another extremely and informative article Nial for which I thank you. I have been saving your vids and articles as they appear and review them on the weekends and between trades. This steady influx of pertinent trading instruction you provide for your member students can only help to reinforce the good habits forex trading requires. Thanks as always.

  44. pat says:

    hi nial
    this is a excellent article i have been reading and watching
    your articles and videos some time now i have went through a lot of stuff on the markets over past 18 months i can not
    find any one to come close to you.
    thank you.
    pat

  45. Jayne says:

    Hi Nial, I found this article really, really helpful. This is going to help me a lot. Thanks – I love reading your forex articles.

  46. laco says:

    Thanks for the article, always looking forward to the new line. Lada, Czech Republic

  47. sergey says:

    Excelent article indeed!My main mistake

  48. adewale says:

    good article,this goes to show the neccesity of trading plan.it makes you objective rather than trading on feeling

  49. Dilip says:

    Great article Nial, as a member of your course I know that you placed a lot of emphasis on having a trading plan, and yet I still haven’t put one together, I must be glutton for punishment. I have been through the emotional ride of fear and over confidence etc when trading, and as I write this I am putting my plan together as I know whole heartedly that I will make the shift from being a “Gambler” to a “Trader” once I have my plan. Thanks again for the reinforcement of what I know I should have already done!

  50. steve portman says:

    Very seriously considered and valuable article. I’m not sure that I understand why it is so difficult it is to win when there are only two directions from which to choose, (up and down) and we spend so much time and effort deciding only whether to buy or sell! Running a business is infinitely more complicated.

    Your trading plan would be of great interest to all of us, I’m sure.

  51. Ivan Delgado says:

    Hi Nial,

    Excelent article indeed! This is the root cause of death and evaporation of most learners. It will be very interesting we get deeper on this, as bridgespotter pointed, sometimes we tend to alter our trading plan cause of new exploration and discovery into new things..when to incorporate them into the plan is a hard call, and one wonders whether it will damage more than help you…When you are a novel trader, at what point you decide that is your “real” trading plan (no changes allowed) and the backbone of your potentially future success?¿ Keep it up! Enjoy Thailand and its food!

  52. kanakzz says:

    Excellent article Nial. I am recently trying to overcome GREED, but its not in moving stop loss.. its moving Take Profit. I have moved my take profit in trades to much higher thinking that it will continue going on, the trade finally reversed and hit my trade at either breakeven or loss.

    Still learning a lot and this article cudnt come at better time than this. I really need to read this again and again and get it in my trading style.

    Thanks again.

  53. Dedan Wangombe says:

    Hi Nial. Great article yu have done.Suppose yu give us a sample trading plan ? Or Send us yours if you dont mind. Newbies need some spoon feeding at times.

    1. nial says:

      I am going to do more of this in the members area

  54. galen says:

    Discipline, patience and a trading plan is the fuel needed to start the winning edge. Thank you Mr. Fuller

  55. bridgespotter says:

    Hi Nial, right on the money as usual. Maybe number 5 could include that you not change your plan in this period. I have found that immediately after a losing trade i am sorely tempted to change my plan but found this is a bad mistake and plans should only be changed after a period of serious and unemotional reflection.
    Your Grateful student
    Bridge

  56. ironn says:

    Great article that’s exactly what I need an effective but simple trading plan thanks nial for all your efforts!

  57. Kim says:

    Great article.. I am making some speed cards to place on my wall in front of my trading station. A constant reminder of what “I should be looking for ” not what I think I should be looking for.

    thanks

    Kim

  58. john shaw. says:

    Excellent stuff Nial. Just wondered if you stick to trading certain currency pairs and get to know their behaviour patterns. For me price action and support and resistance levels are key.I try and keep it simple with establishing trend, using high/low from 12am- 6am and trade the breakouts with 2 M/A crossovers.
    BTW- I trade cable and eur/jpy

  59. Tony B says:

    Great, Great advice many traders fail because of exactly that, No trading plan.
    Once you have been trading long enough it seems that being patient and discipline having a trading plan is a lot easier than winning a few times through random trades and blowing your account to pieces time and time again.
    The psycological damage of losing random trades through no clear trading plan is a vicious cycle that is hard to break.

    To get out of the impulsive random trading syndrome you really need to start from the beginning again.
    you have to commit to a discipline trading mindset, where there is no room for randomness just rules you follow each and every day, only then will the market start to reward you and become a neutral participant of this unlimited arena of opportunity.

  60. Greg says:

    Excellent article and very true. I hear alot about the importance of trading plans but I have never actually seen one to take reference from. Do you know where I can see an example?

  61. frankyboy says:

    Hi Nial. This is an excellent article especially for new traders. In the past I have made all the mistakes you mention (plus quite a few others!) so I know what you are saying is true. I would say have a good trading plan is the difference between treating trading as a serious business or just gambling with your money.
    In addition to my trade plan I also told myself that the best book I will ever read on forex trading is the one I write for myself (after reading many trading books). So I wrote it! In this book I continually update my trading ideas on methods, systems, strategies etc. It has really helped me make the move from just been a novice to a seasoned pro trader. Novice traders must also learn to avoid all the hype and scamsters out there and learn to think for themselves. Otherwise they will end up getting fleeced! Above all Price Action is the best way to trade!!!

  62. Charles says:

    Great artice here Nial. True in every respect.

  63. Max says:

    Thanks Nial,
    This is an interesting article.. I too have a trading plan, which is quite extensive. This is in a word document which i keep promising to myself that i will print it out ‘when its more complete’…

    Prior to your article today I had drawn up a basic A4 wall chart outlining: What markets to trade, position sizing, stops and exits… Detailing the complete steps of a trade end to end.

    So when i am in a trade i can have some confidence in knowing that whatever happens to a trade, be it a Profit, Loss, or Breakeven, I have already planned in advance, what to do in ANY eventuality.

  64. rotimi ogungbenle says:

    You have being given out a very helpful lessons on FX trading to NEWBIET LIKE ME..Your lesson has revealed to me why I blew my account so quickly.
    May GOD BLESS YOU.\
    I am still going to write you on your course .
    Thanks.

  65. john says:

    Excellent article Nial, I have been hoping you would write one on trading plans soon, this really helps..

  66. ope says:

    THIS IS GREAT I NEED MORE

  67. Joshua says:

    Great article Nial. This has been great advice on how to keep myself accountable.

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