Trading Plan - Trade for a living, invest for life   
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Forex Trading Plan Example

Forex Trading Plan: I hope that the first example of writing a trading planonline forex trading has given you a better idea of how and where to start. If you keep in mind all the time that it is much the same as writing a business plan for a new business, then you won't be far away from a good online trading plan. Now if we go back to our example and look at the reverse case, what happens if partner A decides to give up work and partner B will carry on working. Does the trading plan change, and if so how. Let's take a look and see what happens. I will use the same approach and build the plan as we go through the various decision making processes.

Trading Plans - Partner A

The same scenario applies as before, but this time the couple decide that it may be better for A to try and develop an alternative income stream which will help supplement the household income, once they start a family. A's personality is much less risk averse, and feels that something more adventurous may be appropriate. A is also aware of B's attitude to risk and money, and is conscious that they do not want to cause undue stress for their partner. With no online trading experience A feels that perhaps a low investment start up would be more appropriate, but is quite happy to consider a higher risk market. A is happy to trade in higher risk markets, and if the level of investment is low then this should not cause B too much worry since the amount of initial trading capital will be small. The strategy of the trading plan therefore remains much the same as before with only a minor change to the wording on the markets.

My Online Trading Plan - Partner A

My Overall Objective

In the next five years I plan to start a family. In order to help plan for my loss of salary, I have decided to begin trading in relatively high risk markets to develop a small, but growing income stream which will be secondary at present, but which will be a replacement for part of my salary when I do leave my job. I will continue to keep working full time at present. My trading analysis and decisions will be done in the evenings and weekends.
 

Following discussion with colleagues and further analysis on the internet and from background reading, A believes that forex trading offers an opportunity for starting with a small amount of trading capital, yet which offers the opportunity to trade in a leveraged market with both higher risk and higher rewards. A discusses the plan with B, and they agree that 1000 USD is worth risking in the new business, and take the view that if they lost this amount in the learning process they would both be able to sleep at night. A is also aware that this is a leveraged market and therefore much higher risk and one in which both sides of the market can be traded which A feels is important. Forex trading also offers higher rewards for lower start up capital and being a market that is open 24 hours a day means that A is able to trade in the evenings as well as have trades open during the day. A is now able to write the strategy for the trading plan.

My Online Forex Trading Plan - Partner A

My Overall Objective

In the next five years I plan to start a family. In order to help plan for my loss of salary, I have decided to begin trading in relatively high risk markets to develop a small, but growing income stream which will be secondary at present, but which will be a replacement for part of my salary when I do leave my job. I will continue to keep working full time at present. My trading analysis and decisions will be done in the evenings and weekends.

My Strategy

I plan to start my trading with a cash sum of 1,000 USD. If during the course of my initial trading, I exceed my targets then I will consider adding further funds in due course. I propose to trade in currency using an online forex broker and will be trading both long and short.
 

Now that A has an objective and strategy, as before we can start to add some definition to the plan and some forex trading rules. Firstly, A decides that in order to avoid any very high risk pairs that only the major pairs will be considered for forex trading. These will be defined in the plan. A then has to decide on the online trading style, and having read several books on how others trade forex, feels that a technical approach will be best suited for the plan. A has also read about scalping traders versus longer term swing traders, and feels that a longer term trend trading approach would be suited give the lack of experience. Having looked at all the chart timescales available, A feels that using the hourly, daily and weekly charts would make most sense for a long term trade approach, and using candle patterns, support and resistance levels, and simple moving averages to identify possible turning points and trends.

A has also read about the option for new traders to use a demo account. However A feels that this is counterproductive as it is not real money. A has also come across some forex brokers who offer a mini-account which is real trading money, but with very small trading stakes. A decides that this is probably the best approach, as it is real money at risk, but only very small amounts which will help with the learning experience without putting to much capital at risk on each trade. A decides to trade only one contract maximum per open trade which will equate to 10 cents per 1 pip movement. 

My Online Forex Trading Plan - Partner A

My Overall Objective

In the next five years I plan to start a family. In order to help plan for my loss of salary, I have decided to begin trading in relatively high risk markets to develop a small, but growing income stream which will be secondary at present, but which will be a replacement for part of my salary when I do leave my job. I will continue to keep working full time at present. My trading analysis and decisions will be done in the evenings and weekends.

My Strategy

I plan to start my trading with a cash sum of 1,000 USD. If during the course of my initial trading, I exceed my targets then I will consider adding further funds in due course. I propose to trade in currency using an on line FX broker and will be trading both long and short.
 
Currency Selection

I will only trade the the major currency pairs using a mini account as follows :

1. GBP/USD
2. EUR/USD
3. EUR/GBP
4. USD/CHF
5. USD/JPY
6. GBP/JPY
7. EUR/JPY
8. GBP/CHF
9. AUD/USD
10. USD/CAD
11. NZD/JPY
12. AUD/GBP

Trades will be selected using a technical approach
Trades will be selected using hourly, daily and weekly charts
Trades will be selected using candle analysis, support and resistance levels, and simple moving averages.

Forex Trading Rules

I will only have four trading rules which will be as follows :

1. Every trade that I open will have a stop loss in place
2. I will always place the stop loss at the same time as  my trade
3. I will never move my stop loss down.
4. Maximum trade size to be one contract which is 1/10th normal size

The next stage of the plan is to define the capital and money management rules which are similar to those for stocks. In this case A decides to risk only 0.25% trading capital per trade which means that each trade can lose 25 USD so the stop loss will be set accordingly. As this is a mini account with each pip representing 10 cents of price movement then each stop loss will be set at 250 pips below the market price, which is a nice wide stop for a long term trade. This seems to make sense to A. A also feels that in terms of an exit point as the risk is 25 USD then the reward should be at least twice this amount. Finally A needs to decide on the maximum number of trades open at any one time. As before A feels that 20% of capital at risk should be the maximum which is 200 USD, so that this equates to a maximum of 8 trades. A is now able to write the next part of the plan.

My Online Forex Trading Plan - Partner A

My Overall Objective

In the next five years I plan to start a family. In order to help plan for my loss of salary, I have decided to begin trading in relatively high risk markets to develop a small, but growing income stream which will be secondary at present, but which will be a replacement for part of my salary when I do leave my job. I will continue to keep working full time at present. My trading analysis and decisions will be done in the evenings and weekends.

My Strategy

I plan to start my trading with a cash sum of 1,000 USD. If during the course of my initial trading, I exceed my targets then I will consider adding further funds in due course. I propose to trade in currency using an on line FX broker and will be trading both long and short.

Currency Selection

I will only trade the the major currency pairs using a mini account as follows :

1. GBP/USD
2. EUR/USD
3. EUR/GBP
4. USD/CHF
5. USD/JPY
6. GBP/JPY
7. EUR/JPY
8. GBP/CHF
9. AUD/USD
10. USD/CAD
11. NZD/JPY
12. AUD/GBP

Trades will be selected using a technical approach
Trades will be selected using hourly, daily and weekly charts
Trades will be selected using candle analysis, support and resistance levels, and simple moving averages.

Trading Rules

I will only have four trading rules which will be as follows :

1. Every trade that I open will have a stop loss in place
2. I will always place the stop loss at the same time as  my trade
3. I will never move my stop loss down.
4. Maximum trade size to be one contract which is 1/10th normal size

Money Management

My money management rules will be dictated by the following rules. 

1. The maximum loss per trade to be 0.25% of capital = 25 USD
2. The maximum number of open trades at one time to be 8
3. Stop loss to be set at a 250 pips below market price

Finally A decides to set some targets for the business in the first twelve months, and also to keep some records. B agrees to help with the record keeping which is not one of A's strengths! As a target A feels that something quite small would be meaningful as the trades are on the mini account and the account can always be upgraded at a later stage with experience. A decides that in percentage terms a return of 10% should be achievable which equates to approximately 8USD per month - a tiny amount, but if this is achieved it means that there are more winning trades than losing trades, and the account can be upgraded to a regular account where targets will be factored up by 10. This also means that A is taking 83 pips profit per month which would be an excellent start.

My Online Forex Trading Plan - Partner A

My Overall Objective

In the next five years I plan to start a family. In order to help plan for my loss of salary, I have decided to begin trading in relatively high risk markets to develop a small, but growing income stream which will be secondary at present, but which will be a replacement for part of my salary when I do leave my job. I will continue to keep working full time at present. My trading analysis and decisions will be done in the evenings and weekends.

My Strategy

I plan to start my trading with a cash sum of 1,000 USD. If during the course of my initial trading, I exceed my targets then I will consider adding further funds in due course. I propose to trade in currency using an on line FX broker and will be trading both long and short.

Currency Selection

I will only trade the the major currency pairs using a mini account as follows :

1. GBP/USD
2. EUR/USD
3. EUR/GBP
4. USD/CHF
5. USD/JPY
6. GBP/JPY
7. EUR/JPY
8. GBP/CHF
9. AUD/USD
10. USD/CAD
11. NZD/JPY
12. AUD/GBP

Trades will be selected using a technical approach
Trades will be selected using hourly, daily and weekly charts
Trades will be selected using candle analysis, support and resistance levels, and simple moving averages.

Trading Rules

I will only have four trading rules which will be as follows :

1. Every trade that I open will have a stop loss in place
2. I will always place the stop loss at the same time as  my trade
3. I will never move my stop loss down.
4. Maximum trade size to be one contract which is 1/10th normal size

Money Management

My money management rules will be dictated by the following rules. 

1. The maximum loss per trade to be 0.25% of capital = 25 USD
2. The maximum number of open trades at one time to be 8
3. Stop loss to be set at a 250 pips below market price

Trading Targets

I feel that a return of 10% on my trading capital should be achievable in the first year after costs. As I have no previous experience or track record I have divided this into 12 equal amounts giving a monthly target of 8.33 USD. This may not seem very much, but if I can repeat this consistently I will be doing better then most and can always factor the amounts up as my experience grows. I would be happy of this target is achieved in less than 12 months or alternatively all in the last month!

1. A target of 8.33 USD per month in the first twelve months, or a total of 100 USD in the year. This equates to 1000 pips of profit in the year. On a full account this would equate to 1000 USD of profit trading single contracts.

Trading Records

1. A trading diary to be kept every day
2. A manual record of each trade to be kept including the following:

           Currency Pair
           Price bought or sold
           Position of stop loss
           Time trade opened
           Time trade closed
           Profit or loss on the trade
          
3. A daily balance of the overall account position, including cash in the account and open positions value
4. A weekly summary of the total capital at risk
5. A monthly P/L summary of closed trades

Partner A has now written a simple online forex trading plan for currency trading as a novice trader.

 

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