Setting our Trading Plan before we go to the Charts and start trading is of essential importance. Our Trading Plan is about GOAL SETTING using our available resources in terms of equity, ability and time.
Our Trading Plan is about determining how fast we can double our Equity given our account’s Leverage, specifying the position size per pair, and going for a handful of pips per day making the task absolutely achievable and within our current ability so that it can easily become a DAILY HABIT.
We’ll have to use FXHOLIC’S Equation : s X L/10R X p X d = e
s = lot’s size (i.e. for 1 micro lot s = 0.01, for 1 mini lot s = 0.1, for 1 standard lot s = 1.0)
L = leverage (i.e. for an account with 100 :1 Leverage, L=100)
R= the quotient of 1 divided by denominator currency’s rate with USD (i.e. for /USD pairs R=1 for non /USD pairs R equals the quotient between 1 and denominator currency’s rate against USD for example on GBPJPY R = 1/USDJPY )
p = daily pips target (ideally it should not be higher than 20)
d = number of trading days it will take us in order to Double our equity
e = equity in USD (starting out with no more than $1000, we’ll need 10 Doublings to reach $1Million)
***Important TIP : Margin is the cost of trading a lot of a specific pair and each Broker have their own Price-List (margins) for the financial instruments they avail for trading. Spread is the amount of pips a Broker gets as a commission per Trade or per volume of Lots traded. It varies per pair and per session as well as on special Market’s Conditions when big events take place.
Next, we’ll have to set the dates and the amounts of our Doublings on our Calendar.
REGARDING USA TRADERS ***
If you are living in the USA, most possibly, due to local strict regulation rules, you are not allowed to trade with leverage higher than 50:1 and after I’d been told about these limitations by my FXHOLICS who live in the US, here is how the FXHOLIC Equation is modified to meet the USA Forex Trading Accounts Standards :
s X L/25r X p X d = e <== for US Traders
STEP #1 Rules :
In FOREX, we don’t need millions to make millions.
We start with capital we can afford to lose and don’t trade more than $1000 of it till we double our Equity at least twice.