Planning Trades To Control Risk

**⭐ analyst75** · December 10, 2015

The problem with many traders is that they have only half a plan, the easy half. They know how much profit they're willing to take, but they don't have the foggiest idea how much they're willing to lose. They're like a deer in the headlights, they just freeze and wait to get run over. Their plan for a position that goes south is, “Please God, let me out of this and I'll never do it again,” but that's wishful thinking, because if by chance the position turns around, they'll soon forget about their promises. They'll go back to thinking that they're geniuses, and they'll always do it again, which means that they're sure to get caught, and get caught bad.

I have a true story I’d like to share: It’s about a broker I knew and a Coffee trade he made. It goes like this:

I received a phone call from this guy moaning about a Coffee trade he was in. He was managing money and had all of his clients in this particular trade.

Coffee, at least at that time, was, and still can be, an illiquid and extremely volatile market, and is often best traded by people who have a genuine need to trade there. But he was in and in up to his neck in trouble. He said, “Joe! I don’t know what to do! If the Coffee goes down any more, I’m going to wipe out all of those accounts.” He told me he had been so sure the market would move up that he never even planned the amount of risk he was willing to take, and by the time he had determined where to put a protective stop, Coffee had shot past that point.

I told him I had no idea of how he could get out of his predicament, and that was an honest answer. I really did not know what he could do.

Apparently, he decided to pray! He called me back that evening and told me he had gone into the restroom, closed the door on the booth, and knelt down and implored God to get him out of the mess he was in. He promised that he would never again trade Coffee if God would just save his skin from disaster.

The following day, Coffee opened gap up, and moved to a point where he could get out at breakeven. He took the opportunity and got out. Later that day, Coffee moved even higher. Two weeks later, he was back trading it once again.

The broker had no plan for what he would do if the market moved against him. Whatever planning he did was done after, not before, entry into the market. His irresponsibility took unlimited risk with client accounts, having no idea of his exit point.

But perhaps worst of all, he was dishonest with both himself and his clients. He vowed to never trade that market again. Where were the discipline and self-control he needed to keep his promise?

How many of us do the same thing when we trade. We make mistakes, vow to never make them again, and then do the same dumb things all over again. We take risk without planning, or realizing just how much risk we are truly taking. Then the market teaches us a painful lesson. I think you would agree, markets are very good at doing that.

Author: Joe Ross

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uncle gober · December 15, 2015

Plannning trading is important for all trader before they making any decision in the market, with plan trading of course as trader they will can masure their maximum risk in single plan and also they can set target profit according their anaiysys, becaue forex trading is not only about profit but also about loss must as consideration for all trader to manage their capital in account.

**⭐ aliforex** · December 24, 2015

Forex market that aways changes , sometime kinds of market easy to analyze although only use trendline, but sometime news high impact can messed up technical analysis, some trader that trade based on tehnical anlaysis sometime they avoid trade on news high imapct because trend market being randomly and can't analyzed with technical analysis.

Abdul Razzaq · December 31, 2015

It is extremely difficult to control risk, but that’s where we have to be good in order to get success. I believe this control is everything, if we are able to do this correctly then we will win quite often, but if we are unable to control things than winning is very tough. I trade with Nova FX broker and they are brilliant company to work with given their rocking conditions especially with 133% bonus available on deposit, it really helps me with managing risk.

**⭐ aliforex** · January 1, 2016

Planned trading plan will make us better in trading because everything is scalable and can make us more comfortable doing the opening of trading with SL and TP better

January 2, 2016

Planned trading plan will make us better in trading because everything is scalable and can make us more comfortable doing the opening of trading with SL and TP better

yes, have a trading plan in forex trading is important, because with a trading plan that will allow us to trade with the maximum. Sl use and Tp in forex trading is indispensable in order to minimize the risk of forex properly