Can You Trade Forex Without A Trading Plan?

  • October 2, 2023

If you’ve been learning to trade forex from online educators and mentors, you’ll be very aware that the importance of having a trading plan is stressed upon traders. However, there are traders seemingly earning consistent profits from the markets without having a concrete trading plan. So, would it be possible to trade forex without having a trading plan?

You can trade forex without a trading plan; however, it’s much harder to become profitable, and it’s impossible to objectively test a strategy’s profitability if you don’t have a rule-based trading plan to follow.

In this article, we’ll dive into the pros, cons and drawbacks of using trading plans within your trading and investing efforts. So, let’s get into it!

Trading Forex Without A Trading Plan – Does It Work?

The overwhelming majority of traders do have a rigid trading plan they follow when making trading decisions within the markets. The point of a trading plan is to eliminate the majority of human decisions, meaning objective decisions can be made when trading. This typically removes a great deal of emotion and bias coming into trades. In theory, this will yield much greater trading results than relying heavily on emotion and human bias when analyzing the market.

However, having a trading plan does not equal profitability and in some cases, having a rigid trading plan can cause traders to miss out on potentially great trading setups due to the setups not meeting the objective criteria. There can be some nuance within trading plans that need to be considered also – as well as traders having different trading plans for different accounts.  

For example, some traders have a ‘perfect account’, whereby they take very high-quality setups that tick every box within the trading plan. Then, traders also have a ‘secondary account’ whereby they take trading setups that don’t tick every box, more so for testing purposes to develop their skills and gather data around further trading setups.

So, let’s look at the benefits of trading with no trading plan.

The Benefits Of Trading Without A Trading Plan

Believe it or not, there are some benefits to trading without a rigid trading plan that you should consider.

  1. Freedom To Take Any Trades

    By not having a rigid trading plan, you have the freedom to execute on any setup you see within the markets. This can be very lucrative, depending on the outcome of the trades you are looking to take. Obviously, this greatly depends on your experience – if you aren’t experienced within the markets, then this isn’t necessarily a benefit.

  2. Gain Experience Faster / Building Muscle Memory

    When you are taking numerous trades within the markets and not following a strict trading plan, you’re able to gain experience rapidly and build muscle memory in the markets. There are many successful traders that don’t have a trading plan as such; however, they have such a strong muscle memory in the markets that they can execute highly profitable setups constantly. This comes from many years of experience.
    When you’re looking to gain experience, creating a trading journal and analyzing all of your trades, win or loss, is incredibly important, or you’ll be wasting time and gaining much less experience than you could be.

  3. Higher Trade Frequency

    Having no trading plan allows you to take a much higher frequency of trades. If you’re a profitable trader, this is a giant benefit that can allow much faster growth of accounts. However, if you are not profitable – having a higher volume of trades will just ensure that you lose your account balance much faster.
    It’s worth mentioning that even without a trading plan in terms of strategy, a risk management plan MUST be in place. If you do not have a fixed risk, stop loss and management strategy in place, no trading strategy will be profitable – so bear that in mind.

The Drawbacks Of Trading Without A Trading Plan

Whilst the benefits are notable, there are several drawbacks of trading forex without a solid trading plan in place.

  1. Hard To Test Profitability

    With no fixed trading strategy, you cannot conduct an objective back test of your trading plan. This, in essence, means that you have no idea if you’re profitable in the markets or if you’re just wasting your time with your current efforts. Back tests are incredibly important and enable traders to refine strategies, remove emotions, scale accounts confidently and trade profitable strategies. Without this, you’re just gambling for the most part – not investing or trading.
  2. Hard To Remain Consistent

    Without a trading plan, even if you have a winning streak, it’s very hard to stay consistent and maintain your trading profits. This is because bias will change over time, your behavior will change, and the markets will change in time too. Therefore, it can make it incredibly hard to stay consistent without ever having a rigid plan to follow.

  3. Emotions Can Run Riot In Your Trading

    Without a trading plan, your losses are purely due to the nature of your own decisions. This weight can weigh heavy on a trader’s shoulders. When you’re on a losing streak, you’ll want to make more conservative decisions. When you’re on a hot streak, you’ll get greedy and risk higher amounts or take ‘riskier’ trades. By having a solid plan, you can remove emotions entirely and follow a script within the markets.

  4.  Accounts Can Be Blown

    By not having a trading plan, you can obviously take a huge number of trades within the markets. This ensures that trading accounts can be blown rapidly, within days in some cases. This can be negated by still ensuring you have solid risk management in place to ensure that all of your trades are being managed properly – regardless of the types of trades you’re taking.

  5. Harder To Obtain A Funded Trading Account

    If you’re looking to become a prop firm funded trader, not having a trading plan will make this infinitely harder to achieve. The reason for this is simply due to the fact prop firm trading accounts have fairly strict rules on drawdown and maximum loses. If you haven’t back tested your trading plan, you have no idea of your losses and maximum drawdown etc – meaning you cannot be sure of the risk you should be using per trade. Therefore, even if you manage to get prop firm funded, you’ll most likely lose the account due to violating the risk management rules. 

So, Trading Plan Or No Trading Plan?

Weighing up all the pros and cons, it certainly makes more sense to have a trading plan in place, rather than trading the markets with no fixed plan. However, it can be hugely beneficial to have a second trading account with your broker where you trade as frequently as you desire, with no plan in place. This account should be viewed as a learning opportunity for you to test different ideas and trading strategies, whilst not taking additional risk on your main capital or prop firm funded account.

With that being said, on your main trading account, you should be using a trading plan along with a very strict risk management strategy. This is ultimately the only way to get consistent profitable results in the markets. Anything else is just gambling!

In Summary – Can You Profitably Trade Without A Trading Plan?

In conclusion, a trading plan is needed if you’re looking to become a profitable or a funded trader. It’ll be beneficial to set up a second account with your broker to test extra trading setups and further setups, without sacrificing profits on your main account.

Are you looking to become a funded trader? Work with Lux Trading Firm now!