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Nial Fuller

NIAL FULLER
Professional Trader, Author & Trading Coach

Forex Trading Plan – Why You Need A Plan & How to Make One

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By in Forex Trading Strategies By Nial Fuller Last updated on | 68 Comments

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.

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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 20,000+ students since 2008. In 2016, Nial won the Million Dollar Trader Competition. Checkout Nial's Professional Trading Course here.
  1. Yakawonya Rutson September 16, 2019 at 4:44 am

    Always out with a winner post A teacher to cherish Thanks many thanks over

    Reply
  2. Nour September 15, 2019 at 11:45 am

    Nial, you are the godfather of the Forex trading.

    Reply
  3. NKAMA September 15, 2019 at 12:55 am

    You are too much sir. By this you have solved most of my problems.

    Reply
  4. Medi September 14, 2019 at 5:29 pm

    You tha God sent!

    Reply
  5. NGUYEN QUOC THANG September 14, 2019 at 1:28 pm

    Pls support me to explain more about ” Event area ” in the line ” Retrace Entry Back to an Event Area or Prior PA signal.

    Thank you
    THANG

    Reply
  6. Mahmudul Hasan September 14, 2019 at 1:32 am

    Super Nial bro…..

    Reply
  7. Diário de um Poupador March 5, 2018 at 1:32 am

    Hi, i am a brazilian guy who trades for years. I pause my trades during some years, and i came back about 2 months ago. I’ve been trying a strategy with short take, and it has given to me a lot of profits. I am trying to make my mind strong to ignore the market’s movement after i book profit. You have said a very right thing here: the market always makes a retraction.

    This article was very good, thanks. Keep it that way. God bless you.

    Reply
  8. Solomon Olusegun Oyeniyi December 13, 2017 at 9:24 am

    Thank you for this article.

    Reply
    • Liton khan September 16, 2019 at 12:14 am

      Very nice Boos.ok go forawd.

      Reply
  9. GANDUS December 4, 2017 at 6:10 am

    Great always to hear you big brooother Nail. God bless you. timely article for me. love

    Reply
  10. Noor Azman Abd Aziz November 26, 2017 at 2:10 am

    Nice and very interesting. This article answer the questions why i always close trades with losses while actually I have been profitting during the trading session.

    Reply
  11. Sboniso Malambule November 24, 2017 at 6:22 pm

    ive bee reading your lessons im impressed

    Reply
  12. Azmi Yusoff October 17, 2017 at 2:52 pm

    Interesting article. This happen everytime. The idea of wanting to wait a little more time may cause us to lose what is supposed to be a profit instead.

    Reply
  13. Ayanda Mabuza September 18, 2017 at 10:56 am

    reading such artecles really opens my mind.Thanks Nail

    Reply
  14. Roy Peters September 1, 2017 at 2:39 am

    This happened to me recently on Eurgbp. Up 200 pips and thought it’d go higher. Next day market came down and I booked only 40pips!
    I learn a big lesson.

    Reply
  15. Rafari July 31, 2017 at 1:29 am

    ok, its been almost 2 years since I start to learn how the market move. I can say most of your articles give me a vision about how to, what to do and don’t. It’s cool because I start move to learn draw some major snr, I got stuck on making it, but your articles show me some clever way to draw “a key level” and some short term. I’ll try my best to practice it everyday !!!

    Thanks Nial, You’re Awesome !

    Reply
  16. kgothatso July 28, 2017 at 6:00 pm

    U ar really a genus.sir u teached me that i should take a risk than to lose the chance **#great things come to those who hustle (lovely)$$$$$

    Reply
  17. Alan Gillanders June 25, 2017 at 3:25 am

    Hi Nial,
    Thanks for the lesson. This has been my problem for some time. Greed. Always waiting to take more with a small investment. My profits evaporate and majority of times end in a loss.
    In the last 6 weeks I have been taking the small profits. 100 – 200 points instead of trying to get 500-1000 points. seems to be working ok. Thanks again

    Reply
  18. oluwatosn Matthew June 23, 2017 at 5:50 pm

    That’s a good trading guide. Thanks nial.

    Reply
  19. Ages Justice June 22, 2017 at 5:40 am

    Keep it up Mentor. God bless you more!

    Reply
  20. Louis June 21, 2017 at 11:43 am

    This is exactly what was missing from my trading. Realistic exit plans. Thank you Nial.

    Reply
  21. endurance oki June 21, 2017 at 8:05 am

    thank you sir for your well prepared article. Im a victim of this very situation , i’ve almost hit my profit target then i said i should let the profit run but to my very face , the profits were evaporating until i closed the trade .

    Reply
  22. DAVID SHUBE June 20, 2017 at 7:48 pm

    Thanks Nial, booking profits on-time is right, cos too much emotional traits is involved when one realized that the trade is going to retrace unexpectedly.

    Reply
  23. PEERALLY June 20, 2017 at 6:21 pm

    Thank you, Nial.

    Reply
  24. Kate M June 20, 2017 at 6:49 am

    Thanks Nial, way to go. You keep writing evolving lessons like these, Ill always have something to learn. And again an opportune time to write this particular article, I think you are the Yoda of trading:)

    Reply
  25. Lucas Obiora June 19, 2017 at 9:07 am

    Thanks Nial, that’s an eye opener to me, I have that problem of letting profits run into losses, thank you very much for the article.

    Reply
  26. Kay June 19, 2017 at 8:49 am

    Thank you Nial, well explained and organized article. Definitively help me to prepare my Profit plan. Regards

    Reply
  27. smg June 19, 2017 at 3:17 am

    Thank you

    Reply
  28. richadi36 June 19, 2017 at 2:07 am

    Thanks Nial. I really got immense knowledge about booking profits.

    Reply
  29. Suleiman Bhadmus June 18, 2017 at 11:14 pm

    Amazing,am definitely going to include all this point in my trading plan. Though am still on demo, but what have learned from this article in very key to a successful trading.
    Thanks a lot Mr.Nail Fuller.

    Reply
  30. Matt June 18, 2017 at 5:25 pm

    This happened to me last week. Was up 700 proffit and closed with 700 loss because i had such an attachment to what i thought was a fullproof longterm move in one direction so i wanted to ride the waves but it looks like it wasnt the long term move in that direction i thouht it was.

    Reply
  31. akhtar butt June 18, 2017 at 4:44 pm

    Hi, Dear Nial Fuller, , excellent, well-explained with reality and experience. Thank, cheer

    Reply
    • Bebe April 30, 2019 at 7:57 pm

      Excellent article,Thanks Nail

      Reply
  32. Akpos June 17, 2017 at 6:46 pm

    Nice….this has been my bane in trading. Not booking profit….

    Reply
  33. John Promise June 17, 2017 at 6:02 pm

    Thanks Nial. My mentor.
    Remain blessed.

    Reply
  34. Thendo June 17, 2017 at 4:58 pm

    Thanks Nial.. great advise. Am looking forward to not closing or closing when the trade goes against you but hasn’t hit your stop loss…

    Reply
  35. Luis June 17, 2017 at 12:20 pm

    Thanks so much Neil as always, great article!, mm please i have a question, what about the case that all the other trading books and gurus says about let profits run until at least 1:2 Risk reward ratio? , because they say if i close before that 1:2 im cutting my profits and that can damage me in the long run! , but in the real life im bored to wait sometimes for a 1:2 and when im at 90% to achieve that profit target the markets turns down eliminating all my profits and making a loss for me, but when i book the profits i see my account growing, what you can reccomend me about that?.

    Reply
  36. Bruno June 17, 2017 at 10:48 am

    Before reading the whole article, I’m writing this! Just the header alone struck the cord. Toy, Nial, are a mind reading mentor! I’m at that stage in my trading where my edge is consistently delivering profits! But, yes, most times, these profits evaporate. Alot is happening around the political and business world and price is fluctuating between these events. Yes, price still does was it’ll do, but the whipsawing is alarming! I can’t say enough how soothing this article is to me because I make sizeable % of my Acct only to watch some diminish or disappear, even into losers.

    Thank you for this article.

    Reply
  37. Mavhungu Lufuno June 17, 2017 at 9:14 am

    Amen

    Reply
  38. Elpadrino June 17, 2017 at 4:54 am

    Thanks Nial #Legendary

    Reply
  39. Alin June 17, 2017 at 4:20 am

    I am one of those loosers who do not book much profits on the trades, because I’m setting
    way too large TPs. Thanks for the posting!

    Reply
  40. Shankara Motay June 17, 2017 at 3:59 am

    Thank you very much

    Reply
  41. Rongsquare June 17, 2017 at 12:44 am

    Amazing thank you Nail

    Reply
  42. Mike Coe June 16, 2017 at 11:27 pm

    Your articles just keep getting better and better, Nial! Great stuff! Thank you very much.

    Reply
  43. Siyabonga Mkhize June 16, 2017 at 11:10 pm

    Powerful thank you sir

    Reply
  44. KRISTOFA OKENTA June 16, 2017 at 9:37 pm

    Good Teaching As Always.
    Thank you For Sharing Your
    Heart With Us.

    Reply

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