This Article Was Written By Tom Strignano

In trading more so then in any other business, when you fail to plan, you plan on failing. In Forex trading you must have a plan of action written out before you place the trade. The Forex market is way to fast to think you can make sound judgments on the fly. It is full of price reversals and head fakes, and if you have not prepared yourself for the obstacles ahead of you, you are not going to succeed. You need to have studied your Currency Market and plotted out your support and resistance levels before you pull the trigger on a trade. More so then knowing your forecasted price points your Money Management system needs to be sound and in place. Trading Plans are 85% Money Management and 15% analysis. In this article we are going to focus on some of the Analysis.

I have a whole section in my E- Book on Money Management and it needs a lot of depth. It is the most important aspect to your trading. Part of it is Position Size which I went over in previous articles. I will not belabor the points here, but I do suggest you reread them if need be. The trading plan has more to do with how you are able to trade the currency market, based on your risk capital. However, no money management system can make profits for a trader that is hap hazard and makes bad trading decisions, conversely an excellent market timer with great trade selection will not be guaranteed profits without good money management. It is a double edged sword. That’s part of the 85% of the trading plan. I will now go over some of the more important minor (most often overlooked) aspects.

Minor Rule Number 1
Before you enter your trades write down the price move you forecast that you can capture. Look for modest profits; don’t always be looking for a home run. Get on base often and learn to use trailing stops, this way the market takes you out of the trade. When you are in a good position you will be able to ride the wave longer and capture more profits with less head games occurring. Always be mindful of your risk/reward ratio, a good ratio would be 1.7:1. Example you risk $1000. You should be looking for $1700 in profits.

Minor Rule Number 2
Establish profit objectives. It is a bit different then rule number one. In rule one you have your modest gain that you are looking to capture. In this rule we are going that step further where we are in a run away market that is in our favor and have perhaps broke a support or resistance level. You should have an overall profit objective based on a percentage gain to your equity that you would want to lock in. Example could be a 12% gain of your account equity. You will move your Trailing Stop to that level and let the market take you out if a retracement occurs. This is a crucial point to keep in mind, I have seen trader’s double accounts in one day, and lose all the gain and Base equity because of greed and fear, in another trading session. There can be nothing worse then having a great trade turn bad and not having an exit hatch to jettison out of. Believe me you want to keep those gains; it is really annoying when you let them slip away.

Minor Rule Number 3
Have a maximum amount of capital that you are willing to commit at one time. You have to limit your exposure so you do not begin to over trade. Don t open 5 different positions in different currencies at once. Go to were you believe the action is and plan your trades accordingly. If you feel you need excitement go do something that quenches that thirst. Don’ t use your trading account to escape boredom.

Minor Rule Number 4
Have plan for increasing or decreasing your positions. If you want to add to a position do it at certain predetermined levels. Always add less then your base position. (Pyramid Profits with a larger base on first) Example would be if you have 100,000 euro on and you are going to add do 50,000 more, then another 50,000 at a different level. When you go to liquidate the position if you’re long sell into the rally at predetermined levels (Stepping)
If you’re short buy into the dips at predetermined levels as well.

Minor Rule Number 5
Do Not Force A Trade!
This is really not a minor rule; really there are no minor rules just ones that seem to have less glamor then others. I would like to go over something that I feel is a real important point. Realize how fortunate you are that you do not have to trade every day. When I worked at the bank I was forced into trading every day and night at times due to customer orders, Interest Rate Swap tails that needed to be bought or sold, Money Market desk activities; that’s the borrowing and lending of currencies taking interest rate positions. So my point is do not force a trade if it s not there for you. Enjoy the process of being a sniper, and entering on your terms.

So there you have some more golden rules. In my next article I will go over Pyramiding Profits (don t worry you don t have to bother friends or family to sell them Moo Goo Juice) and a technique called stepping.
Cheers
Tom

Thomas Strignano is a retired Chief Foreign Exchange Trader for a major Italian Bank.
His 20 plus years of trading(Market Making) in the commercial Forex market makes him an expert in the field. He has developed his own proprietary trading systems and tested them real time in the interbank market. He has trained a number of Forex traders to be profitable, some who are still active at Major International Banks. Tom s major focus is on market timing techniques with technical analysis, forecasting(future) pivot points for major market moves. His overall objective in trading Forex, is use of good Money management, low risk, high reward positions. Please see Forex Confidant

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http://EzineArticles.com/?How-to-Overcome-the-Smell-of-Fear-in-Forex&id=1950909

Comments By Edward

There is some great info here, so I suggest you grasp every point and apply it to your trading.  There is nothing scarier than placing a trade and then not knowing what to do next.  That is why you should have a roadmap all laid out BEFORE you place the trade.

Another thing is you should not be afraid to lose money.  If you are… you are risking too much! Never place a trade if you can’t handle the loss.  This is where proper money management like Tom teaches comes into play.  You have to learn this or your trading and bank account will suffer.

Before I read Forex Confidant I traded with 1 price target in mind.  And it is a little embarrassing to admit, but the way I came up with the target was just an arbitrary “I want to make 20 pips on this trade” kind of thing.  After reading Forex Confidant, I started using 4 price targets like Tom teaches. And these are not just price targets pulled out of a hat at random… they are based on Tom’s proprietary calculations related to previous price action! I can’t tell you how much this has improved my trading and account balance.

I’ve now graduated to using Strignano’s Forex Signals. Here Tom gives 6 different price levels, and I monitor market momentum according to how it reacts to these areas.  So, after I place the trade, I have a roadmap all laid out for me.  Then I start saying, “If price does X at price level Y, then I will do Z”.  Not only has this allowed me to systematically reduce risk and take profits along the way… but my stress level during the trade has been greatly reduced.

Thanks to Tom , I have started to look at Forex like a pro trader does. I concentrate on proper money management and planning out my trades before I pull the trigger.  Then I just stick to the rules I’ve set for myself  when price reaches each one of the price targets Tom calculates for us.  I’m not saying I win every trade… but I know where I am and what I’m doing at each point of the trade.  I’ve don’t let profits slip away  and ultimately go after higher price targets on each trade… which has had a HUGE impact on the profitability of my trading.

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