To become a successful forex trader, you need to start by coming up with a solid trading plan. This means that you have to specify the conditions under which you will enter or exit a trade, as well as the percentage risk in each trade and the possible adjustments you will make under various situations.
A good trading plan will allow you to track your trading performance better and prevent you from repeating mistakes.
Take note though that discipline is needed to stick to your trading plan, as expert traders recommend putting in enough practice hours to ensure your self-control is in place.
Many traders claim that a good trading plan can be crucial to your success as a trader. It will help your decision-making process, as you can identify in advance the various situations that could take place while your trade is open.
This way, you can also plan in advance the steps and adjustments you will make instead of giving in to emotions, such as fear of losing or panic, while your trade is open.
Also, coming up with a solid trading plan can also help you evaluate which aspects are resulting in wins and which factors are not.
When you are able to do so, you can simply decide to retain the rules that result in positive trading performance and remove those that result in losses. Bear in mind that you will need to keep a detailed trading journal if you want to do this properly.
Another thing to remember is that, if your trading plan isn’t giving you good results, you need to be able to figure out if this is a result of a bad trading plan or poor discipline.
If it’s the former, then you need to consult your trading journal to identify which parts you need to adjust. One way to speed up this process is being able to distinguish justified from unjustified wins.
The justified win is achieved when you follow your trade plan with enough discipline and you win the trade.
The unjustified win is made when you don’t follow your trade plan but still manage to win the trade. This evaluation should be part of your trade journal.
As soon as you have enough trades to make a thorough evaluation, you can be able to conclude if your losers are coming from a weak trade plan or if you need to work on your discipline.
Having more justified wins means that your trade plan is working and that you simply need to keep making disciplined decisions.
On the flip side, having more unjustified wins suggests that your trade plan needs to be modified.