Every trader, whether trading in forex, stocks, commodities etc should have a trading plan.
In the plan he needs to define the rules or parameters, that determine entry and exit points. In the case of forex trading, the trader needs to specify
- what indicators will be used to mark the entry and exit point,
- long or short the currency pair
- which currency pair(s) to trade
- what time frame to trade
- what leverage to use, ie money management, which determine the lot size
Successful trading systems have the 3 main characteristics :
1. They are simple
- Complicated rules will only confused the trader himself
2. They cut losses and let the profits run
- you should have a longer term forex trading system that milks the big trends for profits, and cut losses quickly
3. They follow long term trends
- there is no point in trading for small profits as these small profits will never cover your inevitable losses
Finally, having the right mindset is the key to success!