Forex Trade Plan

Trade Style

I’m a swing trader who does best when playing Wave 5 reversal candles on the 4hr and daily charts. These larger time frames allow for detailed trade planning, which when done properly, equates to better entry points and larger gains on fewer trades. Sticking to this discipline reduces the impulse to trade on a micro move, which for me, more often than not, results in a loss.

Mission

10% per annum with 10% maximum drawdown and 10% volatility.

Concept of Operations

For every trade, determine acceptable risk and reasonable profit targets adjusting stop loss after completion of Wave 2 pullback. Take profit at confluence of support or resistance on 4hr or Daily Wave 5 capitulation, formation and Fibonacci targets. Trail stop of 3% in order to reduce volatility.

Pair Monitoring

The Bank of Japan’s April 4, 2013 statement, the first of the new regime, outlined a strategy to double the monetary supply in two years. This will devalue the yen significantly against the dollar. To that end, I will follow the USD.JPY pair exclusively through 2014 and buy on the dips.

USD.JPY

1. Risk Control. Pairs denominated in USD are traded in USD. Until I invest time in building a spreadsheet to automate this process, it’s easier to eliminate the currency conversion and stick with USD. When determining an entry point, I first determine what is acceptable loss for the trade.

2. Volatility. This represents a conundrum. Traders love it because volatility creates opportunity. Investors hate it because it gives them indigestion. The key is to strike a balance.

3. Fed Policy. Finally, so long as the Fed maintains an easy money policy, USD will flow to emerging markets. While Australia and New Zealand are developed markets, because their economies are largely commodity-based export markets to China, they serve as a proxy for China’s growth. As China grows, so too will their economies.

4. Travel. I enjoy traveling and haven’t yet visited Australia or New Zealand. I figure with success in the market, I might be able to convince my CPA that the trip is for business and therefore tax-deductible.

Trade Setup

My ideal trade setup includes a five-count wave pattern, japanese candlestick reversal pattern, and extended separation between the two moving average lines at either the very top or bottom of the MACD.

201207 to 201301 GBP.USD Daily Chart

What to expect

1. Technical Chart Analysis. Updates to the daily and 4hr charts on no less than a weekly basis. These charts include target entry and exit points based on expected reversals in accordance with the Concept of Operations.

2. Pre-planned trades per pair including risk control, entry and exit strategies.

Forex Market Hours
  1. The market opens at 1700 Sunday and remains open through 1700 on Friday. (These conditions are ideal for insomniacs, gamblers and market addicts!)
  2. The London session overlaps with New York from 0800 to 1100 EST, the point at which market liquidity is deepest (tighter pip spreads), but that’s not my bag, baby. That’s for short term swing trading and scalping.
  3. The daily close for AUD.USD, GBP.USD & EUR.USD is at 1700 EST. NZD.USD closes at 1100 EST.

News

News influences price action in the markets. It’s best to know what pitfalls lie ahead before trading. Use a forex calendar.

Trade Plan Steps

  1. Plan and publish the trade plan to this blog before trading.
  2. Using a forex calendar, identify news events which could affect trading.
  3. Evaluate trends on the Daily and 4hr charts.
  4. Draft a pair movement projection relative to pivot points, moving averages and trends, both prevailing and counter.
  5. Prepare orders to include limit entry, stop loss just beyond wick of the reversal candle, a half-position profit stop, and a half-position trail stop, all around pivots and moving averages.
  6. Assess plan for risk, reduce and execute.

Always Remember…

Fear and Greed rule the market. Bulls make money, bears make money, and pigs get slaughtered!

Don’t be greedy! Manage risk and time your entry accordingly. Do this and you will have nothing to fear. Let the trade play out.

Follow Me coming soon…

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