What is a forex trading plan?

A trading plan is a clear illustration of what you're going to do in the world of forex trading. In this plan you will go over why you want to trade forex, when and how you will go about it. It starts with looking at yourself to learn your strengths and weaknesses, your personality, how much money you can risk, setting realistic goals based on circumstance, ways to manage risks and trading systems.

A trading plan will help you contain emotions and follow rule based steps governed by rationale. The most successful business people in the world learn how to maximize their strengths and minimize their weaknesses. What we are trying to do with a trading plan is create clearly defined guidelines that will spell out every action you will have to take in the course of trading. Thus, any rash and impulsive action is avoided.

Trading plan Vs. Trading system

A trading system is a subset of the overall trading plan. In forex trading system you illustrate your entry and exit strategies, risk analysis, technical/fundamental analysis methods which will be used while trading. You may have one or more trading systems which are used based on the market environment.

We will cover forex trading system in much more detail in subsequent sections.

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