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Trade Articles

Trade Articles

Trade Articles

Disclaimer: The views on the posts and charts are for educational and illustration purpose only, as past performance is not necessarily indicative of future performance. They are provided for general information only and therefore should not be taken as any offer or solicitation to do any investment or trade.

Note: Non-Members are strongly recommended to sign up for the online free course to have a better understanding of the setups as discussed below:

Do You Have A Trading Plan?

By Hector in Trade Articles on 01 April 2019

 A Trading Plan For Price Action Trading

Price Action Trading without a trading plan in the unforgiving financial markets is like traveling without a map in unknown territories.

Without the map, it will cause you to lose precious time and energy. You are likely to make unnecessary U-turns to find the right ways to your destination.  Similarly, without a trading plan, it will cause you to make mistakes and financial losses.

Failing to plan is planning to fail.

A Trading Plan

 

A trading plan is different from a trading system.  A trading system like price action trading defines how you enter and exit trades with your setup signals.  On the other hand, a trading plan defines what is to be done, when, where,and how. It includes your trading system and other important parts like chart analysis, trade executions, trade management, risk management and trading psychology.

Without a trading plan written in your trading journal, your emotions like greed and fear will dictate your trading decisions and experience.

So what is in a trading plan? Basically, it includes broadly the 5 pillars.

Trading Plan 5 Pillars

   1. Pre Trade Preparation
   2. Risk Management
   3. Trading System
   4. Trade Management
   5. Trade Review

1. Pre Trade Preparation

Before you start trading on each day, you should follow a routine to prepare yourself before you enter a trade.

  • Review the charts on your watch list for prices in trading zones
  • Draw your support and resistance lines on your Poems Mercury charts
  • Look for trade setups in your trading system

2. Risk Management

To prevent over trading and taking too much risk over a single trade, you must set your risk control parameters in your trading plan.

  • What is the minimum risk reward ratio before considering a trade?
  • What is the risk of your trading capital on each trade?
  • What is the position size to trade based on this capital risk?

 

3. Trading System

A trading system is the backbone of all traders. It forms the core of what traders perform with their skills based on the rules in the system. For price action trading, these rules involve:

  • Trend Analysis (Uptrend, Downtrend, Sideway Trend)
  • Confluence Areas (Trading Zones)
  • Price Action Setups (Signals)

4. Trade Management

After you have entered a trade, you will have rules in your trading plan to follow on

  • When do you move your stop loss to breakeven
  • When do you scale in or scale out
  • When do you adopt a set and forget strategy and let price action runs its course

5. Trade Review and Journal

Lastly, you need to keep a record of your trades in a journal. This will enable you to learn where you have gone wrong and what you have done right. Your journal may include:

  • Entry and Exit Prices
  • Type of Setup Signals
  • Position Size
  • A screen short of the chart with the entry and exit marked
  • Comments on your trade management to improve on our next trade

 

The above 5 pillars in the trading plan are all equally important factors to work on throughout your trading journey.  As you continue working on it everyday, your screen time viewing charts and trading experience will help improve your trading game.

Do you have a trading plan?

Having a trading plan is crucial if you want to be serious about trading. If you do have one yet, it is time to plan it. The sooner the better!

Remember, failing to plan is planning to fail.

If you want to learn more about our Price Action Trading Plan, sign up for our free online course and be a member of our trading community.

Happy Trading!
One Good Trade

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