One of the big mistakes new Forex traders make is signing into a trading platform and then making a trade based on nothing but instinct, or maybe something that they heard in the news that day. Whilst this may lead to a few lucky trades, that is all they are – luck.
To properly mange your Forex risk, you need a trading plan that outlines at least the following:
- When you will open a trade
- When you will close it
- Your minimum reward-to-risk ratio
- The percentage of your account you are willing to risk per trade
Once you have devised your Forex trading plan, stick to it in all situations. A trading plan will help you keep your emotions under control whilst trading and will also prevent you from over trading. With a plan, your entry and exit strategies are clearly defined and you will know when to take your gains or cut your losses without becoming fearful or feeling greedy. This approach will bring discipline int your trading, which is essential for good risk management.
It stands to reason that the success or failure of any trading system will be determined by its performance in the long term. So be wary of apportioning too much importance to the success or failure of your current trade. Do not break, or even bend, the rules of your system to try and make your current trade work.
One of the best ways to create a trading plan is to learn from the experts. Did you know you can do this for free with our weekly webinars? Click the banner below to find out more and register!