I’ve written about this in the past and will continue to write about it in the future as I believe it is the most important piece for most traders to understand.

First of all; here a few questions to ask yourself.

    * How much money do you expect to make from trading? $1,000/month, $10,000/month, $1,000,000?
    * Do you have a plan on how you will get there? How much you should increase every month towards your goal?
    * Do you have a specific system that is written down? It should be in a form where you could give it to another trader and they would understand it. And even if you trade on fundamentals you MUST have a technical trading plan to go with it.
    * Have you tested it over a period of time? How many paper trades have you done for your system? More than 100?
    * Do you understand how to use a Stop-Loss to keep your risk at less than 5% of your account value?

I have been in business all my life. Worked for many organizations and have personally owned my own businesses. The only ones I have ever seen succeed over the long-term are the ones where planning and risk management where always in focus. So now ask yourself how does a successful business run?

    * Is there planning for revenue and expenses and risk?
      Does a successful business launch into something without testing and risk assessment?
      Does a successful business now when to cut losses?
      Does a successful business have rules and guidelines and policies to follow?

Do you see what I’m getting at? You must measure and have a benchmark to measure against. If you don’t know what you are aiming at you will have no focus and no real way of knowing you are moving forward.

I’ve heard some other teachers and mentors say that the real test is in a live account because this changes the dynamic and real anxiety comes into play. I agree with them BUT I do not believe you simply jump into a live account without a road-map on what you plan to do. If you don’t know where you’re going… any road will do.

I’ve also just posted a new technical report: http://www.fxstreet.com/technical/analysis-reports/fx-weekly-report/2008-08-19.html