Every trader needs to have a trading plan. Below is my trading plan. You can use it as a reference to create your own.
The trading plan describes how I will trade Forex in three parts:
- Risk management
What is your trading goal?
Make a 15R return on my accounts by the end of 2019 using the strategy detailed below.
How will you achieve this goal?
Every Sunday and workday at the New York close I will check for setups and place orders on my accounts. This will be at 23h00 CET. I will also document all trades in my trading journal. By 24h00 I must be done and go to bed. During the day I will only check my trades or charts at 7h00, 11h00, 15h00, 19h00 for 5 minutes max and then again at 23h00 for the daily New York close.
I will also practice the trading strategy on Tradingview by backtesting all pairs from 5 years back or at least 100 trades per pairs.
What are your biggest weaknesses?
Fiddling with trades and overtrading. In general not being consistent enough. Stopping after a losing streak. Trading recklessly after winning streak.
How will you overcome your weaknesses?
- I will limit the number of markets I trade by only trading the markets I best perform in according to my trading log.
- I will limit my exposure to the market to the hours between 23h00 and 24h00.
- I will only trade the daily TF.
- I will trade low-risk position size (1 – 2 %) on Etoro and higher risk position sizes (4-6%) on other accounts to get more of a sense of progression/growth.
- I will only take trades that have a minimum of 1:2 RR potential.
- I will consider every trade as money lost. I will fully accept the risk of every trade and accept that anything can happen and that every trade is unique (as per Trading in the Zone).
- I will apply set and forget trading, but I will manage trades on the daily TF. Meaning I can decide to exit a trade early at every daily close if market conditions have changed.
- I will set limit and stop entry orders with a stop loss and take profit order. I will not enter at market.
- I will remove limit orders that were invalidated.
- I will NOT divide my positions into two parts.
The first part will take profit at 1R. The second part will have an initial take profit target of at least 2R, but I will let it run with the stop loss at break even.
- I will not move my stops.
What is your daily trading routine?
At 23h00 I will:
- Read through my trading plan first.
- Then I will look at the charts for setups.
- I will remove invalidated entry orders.
- I will close open trades if needed.
- I will place new trades
- I will record all actions in the trading journal and post trades on Tradingview.
Which currency pairs will I trade?
USDJPY, USDCAD, AUDUSD, USDCHF, Gold and Silver.
Trade Optimization by Analysing My Trading Log
Review of my trading log has shown that I perform best on the pairs:
Both counter-trend and with trend trades are good. I should not be taking trades when the market ranges.
The following signals have worked best:
For some reason, I am not successful in trading range-bound trends and the Inside Bar and Fakey pattern. I will therefore not trade these setups and signals on my live accounts. I will backtest these some more and see if I can improve trading these setups.
I should only enter with limits and stops, never directly at market. All market orders have been losing trades.
Below is a break down of my trading results filtered for the above pairs, trends, and signals for the period of August 2018 to August 2019.
This yields 26R per year.
Total trades placed: 48
Total trades triggered: 39
Total trades won: 26
Total trades lost: 13
Average win rate: 66%
With trend win rate: 64%
Counter-trend win rate: 72%
On my Etoro account, I will stick to 1-2% risk per trade. On my other accounts, I will trade a bit more aggressively and I will risk:
- 4% on with trend trades.
- 6% on counter-trend trades as they have a higher win ratio.
This should ensure that although my other accounts are small, it should be worth my time trading in these accounts because I could potentially double them in a year as per the below calculation:
4% * 19R = 76%
6% * 7R = 42%
Total = 118%
What time frames will I trade?
Daily. I will look at timeframes other than the daily only to get a better picture of the price action.
What are my entry requirements?
Please also see my Trade Setup Guide, where I describe my method for finding potential trade setups.
Reversal after Indecision on S&R zone
A potential setup forms when there is indecision forming on an S&R zone.
This should mean that momentum is slowing down or has slowed down.
I will trade a possible reversal of the S&R zone.
I can enter at a 50% retracement of a rejection candle or at the break of the candles recent high (bullish) or low (bearish).
If the indecision candle is a pin bar/rejection candle with a long wick I can also use a 50% retracement entry, if not I will trade the break lower or higher.
- Long wicked rejection → 50% retracement entry
- Else break lower or higher.
A reversal can be a counter-trend trade in which case price needs to be far away enough from the 21 SMA. It can also be a with trend continuation trade in which case the price should be not too far away from the 21 SMA. If the market is going sideways and the 21 SMA is more or less flat, I will not set up the trade into two parts. Potential take profit must be about 2R before hitting the 21 SMA.
Reversal after engulfing pattern on S&R zone
As per the method described in the Candlestick Trading Bible.
Continuation after Indecision in trend
As per the method described in the Candlestick Trading Bible.
What are my exit requirements?
Set and forget for target one
Orders will take me out of the trade.
I will place a take profit order and a stop-loss order that will take me out of the market either with a loss of a profit.
If a set and forget trade has been on for three or more candles and price reverses past the last formed anchor candle, then I will close the trade for a smaller than planned profit or loss as the trade will have a high probability of going against me.
I will place stops behind at least two barriers. For example, a support and resistance zone plus a previous high or low that, once passed, will invalidate the setup.
I will place a take profit order at 1 or 2R or right before the next support and resistance zone at a distance that is minimal 2 times the distance of the entry to the stop-loss order.
For more examples see my Trade Setup Guide.
When will I decide not to enter trades?
- I will not place any entry orders if they might be triggered at days with big events like US elections or G20, G7 meetings.
- I will not place any entry orders on pairs that might be affected by news events that are not number-based but people-based, like speeches, notes, etc.
What is your account type and size (and any other relevant info)?
I will trade at Etoro with 1:30 leverage at max. I trade at Etoro, because they have reasonable spreads, are regulated and offer negative balance protection in my jurisdiction. Also, their platform offers copy trading, which makes it possible to share my trades. I combine Forex trading with an investment portfolio in the same account.
My other accounts are all with FCA regulated brokers that offer max 30:1 leverage and negative balance protection.
What is your risk profile?
Low-risk at Etoro.
Medium-risk at my other accounts.
What is your risk per trade as a percentage?
Low-risk account at Etoro: 1 – 2% per trade or I will trade the smallest possible lot size if this means that the risk is still less than or equal to 3%.
Medium-risk accounts: 4-6% of equity per trade.
What is your maximum drawdown before you stop and reassess?
20%, or 10R whatever comes first.
Will you have more than one trade open at a time?
If “yes” to above, what is your maximum risk exposure at any one time?