Plan the Trade and Trade the Plan
Planning ahead is so important in any facet of life. Whether you're planning an overseas trip for your family or planning out your working career, we've all had to plan ahead in life and it's essential in order to achieve our end goal. The Cricket World Cup which starts this week in New Zealand and Australia would have had many thousands of hours spent on it planning out every little detail. Clearly it's the level of planning that goes into an event such as this which makes it so successful.
Hopefully you won't be too surprised when we say that it's no different in trading. Planning out your trades before you execute them is integral to successful trading and it's this ability that allows a professional trader to pull the trigger when a compliant trade sets up. When you're scanning through the markets you should be coming up with possible scenarios that could play out which might lead to a trade. This allows you to plan out the trade in your mind even before it sets up. That way, when the trade does setup, you'll know exactly what to do.
If you want to learn to trade successfully then you have to start looking ahead and planning out trades. Even if a lot of the trades you plan don't eventuate into actual trades it's still worthwhile putting the work in as some of them will setup and pay you for it. Keep a list of every chart that you're watching and the type of scenario you want to see play out, then go back and regularly check the charts to see if you have the trade setup that you have been patiently waiting for. Plan out your trades in advanced and when they setup, trade your plan!
Let's take a look at a current example in the FX market using GBPAUD where we will put together a trade plan should the situation play out. In the daily chart below we can see that price has been in a strong uptrend and over the last 6 days price has been consolidating sideways into the 10 period moving averages. During this consolidation we can see that we have started to form a pretty precise resistance level around the daily candle highs as price has touched the level and fallen off a number of times. The trade plan is going to revolve around this level as if this level is broken to the high side we would expect resistance to become support if we do retest that level once broken.
We have drilled down to the 240 minute chart shown below which outlines the trade plan a little clearer. So as you can see if we get a strong break higher through the resistance level marked out by the blue line, we will then be expecting a pullback to that level. Once that has occurred we will then be looking for an indication that price is finding support at that level and we would use one of our strategies to gain an entry long (around the yellow circle area). The expectation is then that price finds support at that level and continues higher in an uptrend.
So that's as simple as a trade plan needs to be, but by having a trade plan we will ensure that should a situation play out we will be there waiting to capitalise on any trade that comes our way.
Happy Trading!
Regards,
The TWP Team
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