Trading plans contain written guidelines of what a trader will do and look for as well as images of trade setups
Your trading plan should contain a written description of what you will do in the markets. This includes things like what your trading edge is, how you trade it, when you trade it, what time frames you trade (I prefer daily Forex chart trading), your strategy for risk management and profit taking, and your overall goals as a trader. You should also include images of your trading edge setups, so that you are constantly reminded of what an “ideal” setup looks like. Eventually, after you follow your written guidelines and “ideal” trade setup images long enough, you will burn them into your brain to the point of knowing exactly what you are looking for in the market, which will work to build your confidence as a trader.
• Trades planned in advance and ‘anticipated’ work best
One of the main reasons to create a Forex trading plan is because pre-planning your trades and pre-determining what you are looking for in the markets is the best way to profit over the long-run. You will never be more objective and calm then when you are NOT in the market, so if you can plan out all your trades when you are not in the markets, you will be totally uninfluenced by market variables when you are in a trade, and this will work to protect you from becoming an emotional Forex trader.
• Be patient and wait for the conditions of a plan to unfold – don’t force the issue
Patience is perhaps the most important virtue that a Forex trader can possess. When you are a patient trader it means you know what you are looking for in the markets and you wait for your trading edge to appear before you execute a trade. Trading in this manner eliminates many losing trades that are the result of trading emotionally…or without patience. A large part of trading, and perhaps the largest part, is simply waiting for an “ideal” price action setup or other trade setup to form in the market. Traders who don’t wait for an ideal setup to form, end up losing their money quickly because they negate their trading edge and are simply gambling instead. Make sure you stress the importance of patience in your trading plan, this way you will be reminded every time you read it why being a patient trader is so important to making money in the Forex market.