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An Example of Forex Trading Plan

A forex trading plan can always guard you from uncertainties in the forex marketplace. If you have a trading plan, you must couple it with requisite discipline in its implementation. Stick to your plan and you will succeed. If you don’t have your own unique forex trading plan then you shouldn’t be doing forex trading. It is the most important document you must have in place before starting your trading activity.
Here is an example of what a forex trading plan should look like.
Goal
My aim is to make 10 pips or $100 per day over a 10 day trading period.
Market
Target~ I would prefer the EUR/USD spot market. This would be my target market.
Trading style~ I would concentrate on day trading. My trades will be executed between 8.30 am and 11a.m on Monday through Friday. All positions will be closed at the end of the day. Sometimes major economic data is released at 7.30 am CST and if that is the case I would accordingly at times start trading at 7.20 am.
Fundamentals
My trading plan would be unique for that particular day. Before I start to trade, I will research fundamental data relating to the forex market with specific reference to the currency I am interested in. That way I intend to garner overall macro trends and upcoming economic data.
I would also study the technical data over the past several days. This would enable me to figure out the technical movements that are likely to form a trend.
Charts
My focus is on day trading. So candlestick charts would be a vital tool for me. I would prefer to use the 5 minute and 4 hour charts.
The 4 hr charts will help me to identify the major trends and the 5 minute charts will help me to get the timing of the minor trends correctly.
Strategy
I have to first establish the minor trends that are visible. Although I will look at the 4 hour charts to get a broader view of the market, I think it would be equally important for me to focus on the short term trends as I intend to be a day trader.
If I see a non-committal movement in the minor trend, I will refrain from trading until a trend starts showing itself. I will then use technical analysis, more specifically, Moving Averages and Support levels. That way, I will get to know the direction the markets were taking. This would enable me to time my entry and exit points.
Although technical analysis will be the cornerstone of my trading strategy, I would nevertheless study fundamental information as and when it gets released. Sometimes it could be that fundamental information could swing the market against the trend, and if that happens I will go on the strength of the fundamental data.

My Forex Trading Plan would require me to take the following steps

  1. I will determine if the short term trend were bullish or bearish.
  2. I will check to figure out if there were any support/resistance points in the near future.
  3. If there weren’t any, I would go long or short depending on the short term trend.
  4. Supposing if there were indeed support or resistance numbers to be reached in the near future, I will wait for the market to reach those numbers. I will then figure out if a trend reversal were likely to happen.
  5. If I find a candlestick reversal pattern I will trade against the trend.
  6. I will always set my limit at the 50% Fibonacci retracement level

My Forex Trading Plan will have the following built in rules

  1. I will never trade when the market was in a non-committal or consolidation phase.
  2. If the Moving Averages cross against a position I would simply close out a trade.
  3. I would try to achieve at least 5 pips on every trade (indicative only)
  4. I would make sure that the momentum corresponds with short term trend when looking for entry points into a trade.
  5. If any major economic data is to be released I would simply get out of the trade before it happens.
  6. I will stick to my timeline in trading and refrain from trades at the fag end of the day.
  7. I would simply get out of a trade the moment I thought it was going against me.

Conclusion

Your own unique forex trading plan will help you become a consistent winner and train you to make trading decisions fast and accurately. The plan outlined above is a typical plan that would be consistent with the requirements of a day trader. But if you want to be a swing trader or a long term position trader obviously you have to make a different set of plans.

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