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Following your plan does not simply mean just on the current trade you are involved in. Often times, especially in swing trading, you can have plans set up for a few instruments at one time.
Doing this work will allow you to follow a business plan for potential
trades which will allow you to have a plan of attack when and if the setup
occurs.
You will avoid the mistake that most beginning trades make and that is emotionally allowing yourself to
interact with the market.
Once the variables in the plan fall in line, you execute without hesitation. To do anything other than that lacks consistency and without consistency, long term success will not be yours.
That is a guarantee.
This brings me back to a piece I did called "Developing EURUSD Forex Swing Trade"
http://www.netpicks.com/swing-trade-forex-eurusd/
After discussing a current trade, I wrapped up the piece talking about another potential trade in the same
pair.
I wrote: "Since there is no risk on this trade, a strong break out of this consolidation around "B" could set up an addition to the current short trade.“ Let's see how this plan has unfolded.
Looking back at the Dollar Index chart and comparing it to the original screen capture, we can see the resolution of
the bull flag was to the upside.
The resolution was fierce and the last candle is clearly showing momentum in the move. That chart simply added support to the planning stages of the
possibility of adding to the short in the EURUSD currently held.
I was looking for a strong break of the EU range but that set up another issue.
A strong move and close could price me out of the trade depending on the size of the move. That would result in a missed trade on a setup that I was
anticipating given the information the charts provided.
- Keep consistent risk % of total account - If price breaks and then shows bull strength, I would greatly decrease risk or lock in profits. - If price breaks and remains bear strength, let the trade play out.
Here is what happened.
Sell stop triggered @ 1.1250 Feb 26 on strength. Price consolidates over
weekend and on March 4 drops and brings this current portion of the trade
to +167 pips.
The plan now calls for seeing how price reacts as it has breached the low
of 1.1098 where price reversed 400 pips. We could see a failure test in this zone but that alone will not stop this
trade for me. What occurs after a potential failure is what will determine the next course of action for this trade.
The business plan allowed me to have potential trades lined up which would allow me to have a chance to enter a
potentially profitable trade.
Think of going into business with the instrument.
The trade plan forces me to stay present and to aid in my ability to keep
emotions out of the decision making process.
Think of this being an agreement of your responsibility to the triggered
trade.
When trading intra-day, most days will offer you up multiple opportunities to trade. Swing trading is much different.
The setups do not occur on a daily basis and if you are not prepared, you will miss out on the potential that your
edge provides.
I used to be haphazard when it came to possible trades and consisted only of
scanning charts on a daily basis.
Things change.
Even in this day of technology, I still prefer to make notes in a spiral book highlighting:
The days of having a trade idea actually trigger without me on board
are, for the most, long gone. The difference between the years really
has been treating trading as a business and not a hobby or "something" that I
do.
I believe that is why I love to use the word business plan when speaking of
"watch list" instruments/setups.
It reminds me at all times that this is a business where the better capitalized
and more experienced traders want to put your money into their accounts.
Small things matter and if you have to do what it takes to keep your actions
in line with the hugely successful. Business plan.
Two words that pack a lot of energy.