Are you tired of losses in forex trading and need a good plan to recover them? If that’s the case, you are in the right place. If you think you are the only one losing trades, you are wrong. According to a report, between 70% and 90% of traders lose money because they fail to prepare a good forex trading plan.

The primary reason behind these failures is due to fear, greed, or wrong trading strategies. Most traders are unaware of the correct trading charts.

In this article, we will dive into crucial steps to help you create a good forex trading plan if you are a beginner or an experienced trader.

So, when entering any trade in the forex market, ask yourself this question: Can you bear the loss? Forex is a volatile market, and in the blink of an eye, liquidations can occur. Therefore, you need to understand why you’re trading and how much you can afford to lose.

If you are a beginner, you should expect to risk 1% on every trade. Consider your financial situation: only trade with capital you can afford to lose completely without impacting your lifestyle.

Complete a self-assessment by answering: What percentage of your trading account would cause genuine distress if lost? How would a string of five consecutive losses affect your decision-making? Understanding these emotional boundaries prevents catastrophic mistakes when markets move against you.

Read our risk management guide to know more about it.

As a beginner, you might become greedy after a successful trade, and that’s where the trouble starts. You need to define your trading goals. Vague aspirations like “make money” or “become profitable” won’t cut it. Practical trading goals must be specific, measurable, achievable, relevant, and time-bound (SMART).

Initially, set short-term goals, such as learning to read trading charts, achieving a monthly return, preserving capital, and maintaining strategy consistency.

Moreover, outcome goals focus on results (monthly profit targets). In contrast, process goals emphasize actions you control (taking only setups that meet your criteria and maintaining a risk-reward ratio of at least 1:2). In addition, make sure to trade on a lower lot size, so you don’t lose much money when the trade goes against you.

This strategic approach will allow you to learn and make money along the way without any pressure.

In the forex market, there are 128 currency pairs, so it might be confusing for you to choose the best one. Major pairs (EUR/USD, GBP/USD, USD/JPY) offer tight spreads and high liquidity, which are ideal for beginners.

However, make sure the trading session aligns with your time zone. There are four trading sessions. Sydney, New York, Tokyo, and London. The EUR/USD moves most during the overlap of London and New York trading hours (8 AM–12 PM EST).

Asian pairs, such as USD/JPY, are most active during Tokyo hours (7 PM–4 AM EST). Your chosen pairs should be liquid during the hours you can actually monitor the markets. EUR/USD is the most traded pair in the forex market due to its stability.

Understanding these characteristics helps you select pairs that match your strategy and temperament. Don’t spread yourself thin trying to trade everything; mastery comes from focused specialization.

Choosing a trading style that suits your mood and lifestyle is crucial. There are day traders, swing traders, scalpers, and position traders.
Scalpers hold positions for minutes, require constant market monitoring, and thrive on quick decision-making. Day traders close all positions before the market closes, dedicating several focused hours to the task daily. Swing traders hold positions for days or weeks, requiring only periodic check-ins but tolerating overnight risk. Position traders typically operate on weekly to monthly timeframes, making them suitable for individuals with full-time jobs or other commitments.
If you have a flexible schedule, we recommend going with scalping or day trading. Although if you have a 9-to-5 job, swing trading might be suitable for you.

Your strategy is your systematic approach to identifying and executing trades. It should define exactly what market conditions you’re looking for, what technical or fundamental indicators you’ll use, and what constitutes a valid trade setup. Whether you trade breakouts, reversals, trend continuations, or range-bound strategies, document the specific criteria clearly.

As a beginner, go for easy setups. Your entry checklist for this beginner-friendly setup might include just three to four criteria: identify a clear horizontal support level with multiple touches, wait for the price to return to that level, confirm buyers are stepping in with a strong bullish candle close, and ensure the overall trend on a higher timeframe is upward.

If you are trading without proper risk management strategies, you are more than a gambler. The golden rule of thumb is to risk only 1-2% of your capital on every trade. With a $10,000 account, the maximum risk per position is $100 to $200. This ensures that even ten consecutive losses only damage 10-20% of your capital, which is survivable and recoverable.

Define maximum daily and weekly loss limits (e.g., 5% daily, 10% weekly) that trigger trading breaks when reached. Include drawdown protocols: if your account drops 15-20% from its peak, reduce position sizes by 50% until the account recovers. These rules protect capital during rough patches.

A successful trading career demands consistency and a strict routine. Your daily routine should begin well before market open and extend beyond your last trade. Begin by analyzing the economic calendar, the latest news, and the market overview. Additionally, check key support and resistance levels, utilize technical indicators, and look for potential entry points. These should be your daily routine.

Review what worked, what didn’t, and whether you followed your rules regardless of outcome. Set aside one weekly session for deeper performance analysis: review all trades, calculate statistics, identify pattern deviations, and adjust your plan if necessary.

A trading journal is your friend during this journey. Write your mistakes, wins, and confusions in your trading journal. Record every trade with essential data: entry/exit prices, position size, pair traded, timeframe, setup type, market conditions, emotional state, and outcome. Use screenshots annotated with your thought process at entry.

Furthermore, you should also review your journal weekly to assess your win-loss percentages. Track metrics like win rate, average R-multiple, largest winner/loser, maximum drawdown, and profit factor.

We all know forex trading comes with wins and losses. You might win sometimes, but remember that your entire account can be wiped out in a single trade. That’s why your trading psychology must be strong.

Before each trade, check your mental state: Are you trading to recover yesterday’s loss? Are you feeling invincible after three winners? These states corrupt judgment. Implement rule-based breaks: after two consecutive losses, take a 30-minute break.

Moreover, you must set a rule for how many trades to take each day. Suppose you set a rule to take two trades daily, whether they’re wins or losses, and you shouldn’t take the third trade. Consider working with a trading psychologist or joining a community of disciplined traders for accountability.

Studying the plans of successful traders accelerates your development, although you must adapt rather than copy them directly. Examine plans from traders with similar styles, timeframes, and risk tolerances. Notice how professional plans document everything: specific entry criteria, position-sizing formulas, risk parameters, and contingency protocols for unusual market conditions.

There are numerous experienced traders online, including George Soros, Paul Tudor Jones, Bill Lipschutz, and Stanley Druckenmiller.

Remember, trading on forex markets isn’t a piece of cake, especially when you don’t have patience and good trading psychology. The forex market doesn’t reward the trader with the most indicators, the fastest execution, or even the best strategy. It rewards the trader who consistently follows their plan through both winning streaks and drawdowns.

Follow the steps above to develop a solid trading routine and make informed, profitable decisions for your next trade.