How to Formulate a Forex Investment Plan
Contrary to what you may have read, there is no formula that is going to make you an instant millionaire. You can make things as likely as possible for you to succeed by formulating you own forex investment plan that will also to some degree protect you from possible calamity.
When taking a delve into the Forex market you will have three basic time frames with which to hold your currency. Short, medium and long term. Each particular term has it's advantages and disadvantages.
1. The short term trader (the scalper) is going to be trading very quick trades often buying and selling currencies to and fro several times a day. Leveraging is required here to both make a profit and also protect your investment.
2. The medium term trader holds on to the currencies between a day and up to a week or so. The big advantage of the medium term trader is that profit can be made on the least amount of capital invested. This term of investment is the type that people who are new to Forex trading will normally start on because it has less risk involved with it. Profits can be increased by leveraging.
3. The long term trader can hold the currencies from weeks to months and even years. Leveraging is also required here as well as short term trading to both make a profit and also protect your investment.
Whichever plan that you decide to use, stick to it. Don't try all three at once as this will surely cause confusion and lead to losses.
Technical analysis is a perfect tool for you to use in your forex investment plan to help you crack the Forex market. Following trends by using statistical analysis can lead you, the investor, to make decisions that are going to be profitable.
Technical analysis can be used to monitor many indicators as well as the all important price activity. When you get to know more about your personal needs in Forex market, you can get programs that will bring together large amounts of the data that you want included in your analysis. You will be able to customize and organize your plans for your personal investment strategy.
A Forex investment plan should include a stop/loss and take profit order. Basically the stop/loss order will allow you to get out of the trade before things really hit the fan. It can be set when you make the order at a certain level and when the currency falls below that point, it stops the order automatically.
The take profit order is the same as stop/loss but will stop the order when it has reached the level that you have set to reap the rewards. It is a dilemma because you do not want to curb your profits by putting a take profit on your order but unless you watch your account all day, the currency may drop like a stone and you may lose it all. It's better to take little and often.
The great thing about the internet age is that you can get demo accounts set up from Forex trading companies before going live into the real market. A Forex investment plan should include demo accounts as they are fantastic resource for getting to know how things work and for formulating your forex investment plan. They are free and you get a certain amount of "dummy" currency to play with.