How To Build A Forex Trading Plan | 5 Rules For Execution

And the first step is choose the market before it chooses you.

Which currency pairs are you actually going to trade? And I know it sounds like an obvious question, but it's funny how many times this trips people up

Yeah, absolutely.

Especially, I mean, I remember when I started out as well, it was, you know, opened up a platform and scanning everything, you know, some major pairs, crosses, gold, indices, even crypto these days, you know, it can be overwhelming.

So more choice, it can feel like an opportunity sometimes, but it often just creates more noise.

Yeah, and that's the thing.

You also, you don't get to know the pair well enough, which means that you often end up making very rash decisions.

So you want to really start smaller.

You want to choose a watch list that fits your knowledge, your trading hours.

That's a very important part.

And then your tolerance for volatility.

For developing traders, for example, that may mean that you choose two to four very liquid pairs rather than 15 instruments.

And what we mean by liquid pairs is pairs that have a lot of buying and selling activity, like, for example, the EURUSD.

Yeah, and then it doesn't have to be permanent here, right? That's important.

You just need a reason for it.

You might choose your USD because it is liquid both during the London and the New York sessions.

You might include the GPB USD if you understand that it can move more sharply sometimes.

You might avoid a cross or a minor pair or anything like that because it's typical spread or its behavior just doesn't suit your strategy.

And you also want to look for hidden duplication.

I think this is something that people also don't realize is correlation.

So if you're long EURUSD and long GBPUSD at the same time, you may think that you've actually got two separate trades.

But in reality, both positions are very heavily reliant on US dollar movement.

So you may not realize how much risk you're actually adding to the table when you're trading the same direction on two pairs that are heavily correlated.

Yeah, so you want to write down three things, Alison.

You want to write down your core pairs, any pairs you're going to trade under certain conditions, and then the markets you do not trade.