Sunday, July 25, 2010

The critical factor in achieving success as a trader is your ability to plan. You need to plan your trades to minutes details. You need to have a clear view of the following key issues:

a) Target monthly returns on investment i.e. 5%, 10%, 50% etc
b) Monthly returns on investment broken down into weekly and daily returns
c) Your target return clearly expressed in US$
d) Total number of pips required to meet your target broken down into daily and weekly pips required to meet your target.
e) The lot size commensurate to the value of your account. I will my analysis in respect of:

Daily Returns on Investment
Recommended ratio of lot size to account size
Returns on investment table
Attached Thumbnails
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The explanation is simple. For example, for $1000 account if your target returns on investment is 10%. This translates to $100 per month. To get your daily target divide $100 x 20 (trading days) = $5. This translates to $25 per week.

Planning like this gives you a clear picture of your expectation. It makes it easier to trade. If on a good day you are able to achieve a profit of $25, you can easily make the decision not to trade for the rest of that week, since you have achieved your target. Furthermore, once you achieve your target for, you can stop trading for remaining days of the month.

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