Emphasis must be on the bottom line result at the end of each month. The worse possible scenario is to lose a
lot of money on a single trade. No matter how good you think your idea is, you must limit the amount of capital at risk on a single trade or a single trading day. You will have bad trades and bad days; their impact on the monthly result must not be extreme.
In putting together your trading system its best to write down all your ideas in no particular order on a piece of paper. Then decide if the plan you put together reasonably suits your personality.
Here are some things to think about:
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- Determine if you want to be an intra-day trader (close all positions by days end), a day trader (keep positions overnight and possibly longer), or a long-term trader (keep trades on for days to weeks).
- How much of your precious time are you going to devote to trading? Break it down between time actually spent trading and time spent preparing for the following trading day.
- Figure out how much risk capital you will be bringing to the table. Think about how to break it down such that you’ll be around for a reasonable amount of time (so you don’t blow up).
- Will you be using our total trading strategy that combines technical and fundamental analysis? Or will you be strictly technical (strictly fundamental only works for very long-term traders). Strictly technical is what most traders choose (and most traders fail). We recommend the combined technical and fundamental approach.
- Figure out a strategy that works for you in terms of the number of lots you will be trading (ties into money management).
- Consider your stop loss / take profit profile. How will you be entering and exiting trade.
- Have you educated yourself enough to begin trading.
- Most important: Stick to your plan
Note:
Jimmy Young is a seasoned institutional
forex trader having 20 years of experience with different banks. He headed up bank FX dealing rooms. He is FX profitability consultant to major European private bank. He manages funds and also trades personal money. Between 1981 and 2004 he was a foreign
exchange trader at following banks: Societe Generale, Julius Baer, Fuji Bank, Indosuez, Erste, Hill Samuel, Manufactures Hanover, Paribas, European American. www.EurUsdTrader.com
