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Do You Know Your Forex Trading Objectives?

forex trading objectives

What Are Your Forex Trading Objectives?

I wanted to put together this section to help you clear out some misunderstood concepts you may have come across along your journey through the FX market.

You see, at the beginning of my trading career I never thought of having set objectives and plans in place to tackle problems that may arise. I was driven by the idea of making money and lots of it. You may call me a fool, but my greatest weakness was not having my trading objectives set.

If you can relate to this, don’t worry. I do understand where you are coming from. I was in the same boat.

So what are you meant to do?

Trading the foreign exchange is definitely not rocket science, tricky yes, but not impossible to master. Thus, when you start your trading career you must ask yourself this question:

“What do I really want to achieve?”

You have to be clear about it and stick to it. If you do not know your destination, how are you going to get there?

If you are wondering how to go around and set those rules, well don’t worry, I’ll make your life a bit easier and point out the main points you may want to review. I sincerely believe that this will help you in your progression as a trader. It may take some time but perseverance and good planning is the key to success.

Here are the points you may need to consider.

• Which markets do I want to trade and why?
• What is my account size?
• The amount of leverage I am comfortable with?
• What level of risk I am ready to take per trade?
• The maximum drawdown (% losing period) I can tolerate?
• Do I only want to go long (make money on rising markets) or...
• Do I also want to go short (make money on falling markets?
• How will I use my trailing stop to take profit?
• What is my intended trade duration? Do I want to hold my position for minutes, hours, days, weeks, months or years?

Those are just some of the question that you may want to ask yourself before starting your trading career. These are simple but vital questions that will help you put together a system that is right for you.

To give you a better idea lets say that you have $5000 to invest.

Great, now the next step is to decide which market you want to trade in, Asian, European or US. If you are bit of a thrill seeker and looking to take advantage of high volatility, then the European and the US market will be an attractive choice.

Now that you have set you mind on the matter lets take a look at your account size. The amount of lot you’ll want to trade is debatable in regards to the amount of money you are investing. You have the choice of a micro or mini account with such an amount. I would however recommend you to start with a micro one and as you get a bit more experienced upgrade to a mini.

The amount of risk you are ready to take is another crucial part as a trader. 1%-5% of you account size. You may have come across those figures already but which one is the right one for you.

From experience, a risk of 1-2% on any trading account is tolerable and realistic. You may decide otherwise but remember that your goal is to minimize your risk and maximize your gain.

As a trader, are you looking to go long only and take advantage of the market when it is trending up or do you want to be a two-way trader, that is take long positions at bottoms and short positions at peaks. This choice will depend on the type of trader you are. If you are a conservative trader, you may opt for the first option as it may reduce risk to a certain degree and as an active trader, you may consider the second option to profit in both long and short trades.

Trailing stop may be one of the most neglected parts of trading. Let me put it that way, if you were the head of a country and you were at war with your neighboring country, would you be 100% offensive sending all your troops on the battle field or would you devise a plan where both your offensive and defensive strategy were balanced out. I bet you’ll go for the second one in case your enemy retaliates.

Trailing stop can be related to just that where every attack you make (trade you take) must be followed with a good counter attack (trailing stop) in case the trade goes against you. Remember that to every attack there should be a damn good plan of defense. This is something you definitely have to consider if your goal is to be a successful trader.

Happy trading