I did promised in my success capsule page on this blog that,I will be explaining in details the most common mistakes traders commit while trading.
Any coach in any sport will tell you, “You must have a game plan!” Well, the same thing is true in trading. I am in constant contact with hundreds of traders and I am truly baffled that, trade after trade after trade, one of the most common mistakes a trader makes is not having a defined
trading game plan.
A trader who thinks a market is about to go up will usuallysay something like –“I think the EUR/USD is going up to $1.3000. Where do you think I should buy it?” My response
is usually something like, “What are you risking on the trade? In other words, “Where are you going to get out if you are wrong?” Often the response is silence, or perhaps a puzzled “Huh?” No thought was ever given about being wrong or where to place the stop. My next question, “If it does go up, how and where are you going to get out?” I often receive the same response.
More than 90% of the Forex traders that I come in contact with have no trade plan. That means that they do not know what to do if they are wrong and they do not know what to do if they are right. The large paper profit they made often turns into a large realized loss because they did
not know where to get out.
The most important move a Forex trader can make is to develop a trade plan, before entering the trade. The trade plan should consist of these guidelines.
• Know how and where you are going to enter a trade.
• Know how much money you are willing to risk on the trade.
• Know how and where you are going to get out if you are wrong.
• Know how and where you are going to take profits if you are right.
• Know how much money you are going to make if you are right.
• Have a protective stop loss in case the market does the unexpected.
• Have an approximate idea of when a market should meet your trade objective.
When should the market begin to make its move, and if it does not move as expected, get out!
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