Wednesday, February 22, 2012

TRADING PLAN


In carrying out a profitable trade, you need to ask yourself the following questions,
1.   Do you have a trading plan
2.   What strategy do you want to adopt
3.   What would be your initial cost implication (variable and fixed capital)
4.   Understanding Time zones
5.   What ideal and realistic profit are you envisaging( day, week, month, year)

Let’s have a clear look at these questions
1.   DO you have a trading plan?
As a guide I advice you have a trading plan, as a solid house is built on solid foundation. Your plan should be such that allows you to go online and place your trade without been worried over the profit margin. As a trader you need to be confident of your trades in either way. Do not gloat over the system and watch as the price fluctuates as this will cause unnecessary panic and may cause you to make wrong decisions. Just place your trade and get out of the market. If in doubt of your trades, ensure you use a stop loss. I rarely loss stop loss for my trades not because I am confident, rather I do not want the trade to close at my Stop loss knowing well that it will definitely hit the take profit even if it will take 4hours. However to do this you need to know your margin in the trade to know when to accept the loss and move forward. Only baby traders sit with the system observing the price as it fluctuates.

2.   What strategy do you want to adopt ?
It is very imperative that you have a trading strategy to place a trade and know when to walk away. The market is not a must win affair. Sometimes just allow your doubts to have its way, and make profit some other day. Personally , I do not place trades in the morning hours no matter the signals or news I have at my disposal. I just feel I do not want to get in the rush with the big dogs in the market. The London hours are the most active in the Fx market and a lot of trades go on during these hours. Getting into the market at such periods is too uncertain a risk for me. I just trail the market and allow the price to fluctuate as high or low as it can get. When its 4pm GMT I prefer going into the market. At this hour, the London session has winded up and the Newyork session is already on full swing. As the time begins to go, currency prices begin to react to the market naturally, as traders in most part of the world in the Eastern time (EST) zone are rounding up and closing for the day. These evening hours on the GMT are my trading hours. Prices usually drop, and I place my trade on the sell area. The fluctuation of price is usually between 10 to 25pips. At late hours of 8pm GMT, my trades are placed on the buy area, even though I am aware that the price will go against me at that time, it is certain that at Tokyo session(1am GMT+1), prices will take a new turn and will hit my take profit. However, I make sure that the margin for loss is very high so I don’t get knocked out the market untimely. Please practice as much as you can and adopt a strategy that you are comfortable with.