My New Trading Plan
This is a “living” document and subject to improvement over time.
Introduction:
It is important to start a Trading Plan by being clear that the plan is engineered to ensure that consistent and constant profit returns are maintained with minimal losses. That's not to say that there are not people making livings just studying candlesticks, and price action; However, I have found that a larger view and understanding of the market is crucial for success. Price action plays a large role within that overall picture, but I do not suggest following any candlestick signal blindly. Through intensive study we need to see the market in a whole new light. The following points will cover this.
· Market Focus: my personal main focus is within the currency market, followed by Indexes and Commodities (Oil is my main bias).
· Market Timing Comprehending that the biggest players in the market are the Institutional and Professional Investors. 85%of all activity comes from them and they control Billions of $’s. It is these institutions who create DEMAND. We therefore need to become experts at Market Timing. Price is the function of Supply and Demand. The biggest Institutional Funds are the Pension Funds, comprising of trillions of $’s . . . The thing that drives Price is VOLUME. How can we measure demand? Demand is therefore measured by looking at the Volume. The Volume of the amount traded and is the only footprint left for us to examine the markets TREND. It indicates to us as to where these Big investors Entered or Exited the market. Identify with Certainty where the market is going.
· Exercising FAITH and Developing psychological Toughness. True faith does not operate in a vacuum. I heard a Christian Minister (Dr. David Jeremiah) ask the following question which left an indelible and unforgettable impression in my life: He asked if you were to go pole fishing where there is snow and ice, “How much faith do you need to stand on one inch of ice compared with one foot of ice?” Very good question! If you prefer to fish on one inch of ice, please don’t ask me to go fishing with you. However, if you have done your homework properly you need very little faith to trade. Psychological toughness develops over time as we trade.
· Trading Type: The full nine yards including: Scalp, Swing and position trading (Ref: Forex Fanatics Strategy).
· Main Indicators used: Real Volume, ATR (daily chart), 20,50,100,202 SMA’s, Bollinger Bands, RSI 9 and Currency Strength Indicator.
· Stringent with Risk Management Control & it’s many components.
· What To do once in a trade: Number #1 Question: Never Ask . . . What do I do now? (A pilot or Surgeon do not ask this – they are trained to Know what to Do). Number #2 Question: Where do I place my Stop? Number #3 Question: What is my Profit Target? Number #4 Question: How do I protect my profits?
Some Nuts and Bolts of the Trade Plan – Zero Gravity
“Only Action determines our Value in the market place and to multiply our Value we will multiply our Actions”
Play your “A” Game Every Day and Stay Focused
1. ANNUALLY
First week of January every year – Examine and do technical analysis of the monthly and weekly charts.
2. WEEKLY (SAST Time Zone – South Africa)
Saturday/Sunday afternoons (During “the Gap” when all markets are closed).
· Ensure that all charts are permanently setup and in order and that indicators selected are correctly set.
· Early morning analysis of the Weekly, Daily & 4H charts aligned. Examine 20 currency pairs and look for highest probability trades Seek out bargain Buys & Sells.
· Read the language of the market contextually and calculate the edge for success. Be willing to grant the market power over decisions. Keep growing in the areas of Diligence, Patience and Discipline. “A Market can stay irrational for a lot longer than I can stay solvent”.
· Pick good Support and Resistance zones to enable the execution of entries and exits without requiring confirmation and increase profit potential . . . giving a trading Edge. This strategy requires much smaller stop losses.
· Look back in time for Strong Support and Resistance zones. Read and comprehend the ranges traded by the big institutions. Look to see if they were caught in any ‘Bear” or “Bull” Traps and observe the volatility that occurred. In cases where they are caught in Bear traps, these areas become extremely strong Resistance points and are difficult to cross over. “Gaps” are also a clear sign of this. Identify if there are any range bound Congestion/Consolidation Channels (Horizontal, ascending or descending). Look for where sudden big vertical moves transpired, thus forming flag patterns. Observe where there are other patterns ie., Head & Shoulders etc. Determine how the present price reached this point.
· PREPARE the OPEN RANGE STRATEGY before the London Market Open.
Set up 30 Minute charts for 5/6 major currency pairs the main one being GBP/USD. DRAW the P.O.C. (Point of Control) horizontal line on all the charts (Purple). This is the calculated previous day Highest Volume Price. Main Pivot (commonly known in professional trading circles as the “Meat of the Market”) – draw a horizontal line (Magenta)
of the previous days (per the Daily chart) HIGH, LOW & CLOSE divided by 3 or (H+L+C)/3. Draw a Box/Rectangle (green border, white background) on the charts of the previous days last 30 minute London closing period. The parameters are: the Highest & lowest activity points including the wicks. Examine the Candlestick Price Action within the box using a 15M chart. Draw a dashed horizontal line (blue) in the centre of the box to reflect throughout the charts (Now we have 3 solid levels from which to execute Buys or Sells safely and effectively). Take note of the early activity outside the box (ideal for Brace Strategy implementation – the dashed line acting as Support or Resistance at this open range time cycle).
3. DAILY
· CHECK BOTH THE FINANCIAL & HOLIDAY CALENDARS
· Watch and observe the Price Action and Direction of the currency pair/pairs on the Open Range 30 MIN charts (London Open Range price cycle) – attention time required only 40 minutes tops. Check for activity outside the prepared Box. Frequently watch the horizontal line levels throughout the day. Go long above the Open Range or Short below it.
· Implement Money Management Rules throughout the day to minimise Risk.
· Be on the Watch for Short Term Scalping and Swing Trading opportunities.
· Stay Aware of Market conditions, Price Movements, Momentum, Reversals and Drawdowns.
· Plot Pivot Step Entry & Exit Points.