Functional forex trading plans (also known as forex strategies) are very important to every forex trader. A forex trading plan or a forex strategy is defined as a set of analysis employed by day traders in determining whether to buy or sell a specific commodity at a given time. However, there is no such thing as a forex trading plan without a good understanding of how to read the forex charts. Forex trading plans are based on analyses, and analyses are based on forex charts.
In understanding forex charts, a trader has to be conversant with the following
Identifying and plotting support and resistance
Trading the trending market
Counter trend trading
Range bound market trading
Candlesticks charts and pattern
Knowing what they mean off the forex market will gives traders a better understanding of forex trading plans, and will help the trader in choosing the plan that works for him or her.
HOW TO PLAN A FOREX TRADE
In planning a forex trade, one has to ask the following questions
What is the adopted daily routine for analyzing the forex market?
How can one enter and manage positions?
When can one trade the forex market?
WHAT IS YOUR ADOPTED DAILY ROUTINE?
First, traders should know that what works for Mr. A may most likely not work for Mr. B. This is because there are different types of traders, all of which approach the forex market differently. There is the scalper, the day trader, the swing trader, the long term trader, intermediate term trader, and position trader. Finding out what kind of trader you are is a sure way to help you develop a forex trading plan that works.
HOW CAN ONE ENTER AND MANAGE A POSITION?
This is basically the strategy for trading the market. This can only be developed when a trader is clear about what kind of trader he or she is. In the beginning, a trader might not really understand how to develop a forex strategy, but with time, the trader will come to understand more about the type of trader he or she is and from that, develop a trading strategy. It is important that traders customize the strategies with time, after they must have understood what they are willing o give to the forex market and what they expect in return from the market.
WHEN CAN ONE TRADE THE FOREX MARKET?
At this point, a trader should know what currency pair to trade. The next thing to know is the best trading session that will favor both the currency pair and the trader’s strategy. There are four different sessions in the forex market. It is important that the trader understand them all and chose the right one to work with.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.