Developing a Forex Trading Plan

Developing a Forex Trading Plan

Before you begin developing a forex trading plan and approach that works best for you, you need to give some thought as to what resources you have available for your forex trading. There are two main resources that you have available: time and money.

If you are a full-time forex trader you have lots of time to devote to both market analysis and actual trading. But, remember, currencies trade around the clock and you must bear in mind which session you are trading and of the daily peaks and troughs of activity and liquidity. Just because the market is open does not mean it is the best time to trade.

If, on the other hand you have a full-time job, you may not be able to take time out to catch up on charts and economic reports while you are at work. This means using your free time to do your market research. Be realistic about how much time you can devote on a regular basis, keeping in mind your family obligations and other personal circumstances.

When it comes to money, trading capital has to be risk capital and that you should never risk any money that you can’t afford to lose. The standard definition of risk capital is money that, if lost, will not materially affect your standard of living. Therefore, remember that borrowed money is not risk capital and you should never use borrowed money for speculative trading.

When you decide how much risk capital you have available for forex trading, you will have a better idea of what size of account you can trade and what position size you can deal in. Most online trading platforms offer generous leverage ratios that allow you to control a larger position with less required margin. But just because they offer high leverage does not mean you have to fully utilise it.

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