How to Create an Effective Forex Trading Plan and Define Short-Term Trading Goals

A trading system will be used in the process of Forex trading, and a relatively simple trading system at least includes these four aspects: establishing a position, closing a position, stopping loss, and fund management. The use of these four aspects of the trading system is included in the Forex trading plan. In other words, when establishing a trading plan, the use of the trading system has actually been taken into consideration.

So, how to formulate a Forex trading plan correctly and effectively is an issue that many investors focus on. We will discuss the formulation of a Forex trading plan from the four aspects included in the trading system.

Establishing a trading position is the real start of Forex trading. Establishing a position actually solves the problem of buying and selling Forex. At this point, investors must judge the trading direction based on their own analysis. The judgment of the trading direction requires a comprehensive analysis of fundamental factors and technical factors to fully understand the market conditions. I will not go into details here.

Secondly, the issue of closing positions. In the Forex trading plan, the consideration of closing positions should be carried out simultaneously with the establishment of positions. Many investors may think that closing positions is not a problem that should be solved later. In fact, when the direction of Forex trading is established and the position is established, a series of issues such as how the Forex market trend runs and the point at which the position can be closed also need to be considered. The key point is to judge the fluctuation range of the Forex market, ensure profits to a maximum extent, and establish a liquidation plan while minimizing losses.

The purpose of short-term trading is to maximize the use of funds and pursue profits. This is the fundamental purpose of short-term trading, because what we are conducting is a long-term Forex speculation and is not or has never been to win the company represented by this Forex and share the profits that this company may bring.

Short-term and long-term by themselves do not guarantee you a profit. No matter what time scale you choose to trade, you will make or lose money.

The ideal short-term trading is to buy at the bottom of every wave, sell at the top of every 2% to 10% range, then buy at the next bottom and sell at the next top, and sell high and buy low again and again, no matter the bull market or the bear market. However, in real trading, due to the limitations of human nature, we cannot do this, so we have the operation technology of following the trend. This is actually an impossible compromise. The compromise is to the point where human nature can be controlled, and short-term trading cannot get rid of this compromise.