In order to be a successful forex trader, you have to think of yourself as being self-employed and your trading activities as your business. Unless you develop this mindset, there is no way that you will ever be able to make a living from the currency markets. Here are the things that you need to do in order to start treating your currency trading as if it were a business:
• Start by creating a trading plan:
This trading plan is the equivalent of the business plan that you will have to draw up when you start a new business. This trading plan includes the trading strategy that you will adopt when trading. Once you’ve created the plan you should evaluate it using simulations based on reasonable assumptions which will give you an idea of how profitable it can be.
• Set your financial goals and requirements based on your plan:
Start by determining how much the trading capital you allocate will need to be based on the profit targets your plan can support. Then, think about how much you will risk per trade. The amount of money you think you will trade per trading day represents your business expense or what you will have to spend in order to generate a profit. You should also set financial goals based on the expected performance of your trading plan.
• Create best and worst case profit scenarios based on your simulation:
As with any business, your forex trading will experience ups and downs. These scenarios can be used to gauge how well your business is doing and whether any downturns you are experiencing are part of the normal trading process or if it is not normal and you need to reevaluate your trading plan.
• Constantly evaluate your trading plan:
You should do periodic evaluations of your business on a regular basis (quarterly, yearly or even monthly) to see how well you are doing in relation to your financial goals. If you are not meeting your profit goals, you may need to adjust or change your plan. Otherwise, if it is working as expected, don’t tinker with it or change it; avoid the mindset that if you adjusted the plan slightly you might be able to squeeze a little more profit out of it.
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