New Forex Trading Plan
June 6, 2006 by Trader Rich
I must change the way I've been trading. First, I have to stop trading with reckless abandon or I won't be doing this much longer. I have not made any trades this week but in evaluating my performance over the previous months, I'm not ready to throw all of my money away. I'm not ready. Something I'm taking away from the FXCM expo is Jes Black's comment to trade more in your demo account and less in your live account. So here is a quick list of what I'm going to try to do in the upcoming weeks:
- Trade exclusively in my demo account except for the following:
- I'm going to take a chance and try trading the news with fxengines. I feel the risk of only 10 pips to trade the EUR/USD during market moving news releases is just to good to pass up. I'll be sure to let everyone know how that goes.
- I'm only going to trade the AUD/USD during the US session. Why?
- I've found over the past months that the AUD/USD is a relatively stable pair compared to others during the US session. There are certainly not the wild swings seen with the GBP/USD and I believe it moves more consistent in a direction than the EUR/USD. The profit potential is less with this pair compared to the GBP/USD but I believe the risk to reward to be a very good 1 to 2. In fact, if the pair gets going a bit in the morning, I can realistically see capturing at least 40 pips of profit. There are obviously no guarantees with anything and I could be wrong but this is my plan.
- Study price action in 1 currency pair, the EUR/USD. I really want to try to stay away from indicators because they are just such laggards. If I can learn to look at a chart and instantly recognize price patterns, I will be better off.
- Continue to experiment with a couple of trading systems I'm working on, specifically a couple with pivot points. Backtest and forward test with my demo account.
I must remain disciplined and stick to just these 3 tasks. I do not think it would be beneficial for me to jump into anything just for the sake of doing it. I think these 3 tasks actually encompass the following:
- Trading Live to learn to control my emotions
- Continued studies to learn how to trade discretionary
- Continued experimentation to see if the possibility of a mechanical system exists
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Rich,
Good luck with your new trading ideas! I am tempted to try trading the news with fxengines. I’ve never traded the news before so that should be interesting…
If you wan’t to trade the news, I would be sure to sign up for Felix’s alerts at http://forexbastards.com/
He sends out a nightly report on what he will trade the next day and what economic numbers will trigger a trade. The signals are free and a big part of what I use with the newstrike service (again free)
http://newsstrike.com/home.shtml
Also be sure to check out tom Yeomans new site:
http://tradecallsroom.com/
He’s the King of news trader but his service is pretty expensive. On his new site, he has a lot of free information and he’s been putting up his triggers (what he calls any entry point on a news trade) for free.
I will probably test out FXengines also but currently, I like trading news using Newsstrike and predefined triggers based on Tom’s, Felix’s, and my own research.
William
Hi Rich,
What is good about trading a demo account? You miss the emotional part in it which is your biggest enemy in real trading, so a demo account is useless in my opinion. Why do they recommend the big timeframes for trading? I feel ok using 5 - 15 min timeframes and still making money.
I have serious doubts about those who make a living trying to tell someone how to trade, again, if I knew it that well, I would spend my time trading forex making big bucks. How’s Rob Booker doing? Is he still your mentor?
Best regards and good luck,
Wim
Wim, I think Jes’s comments was trying to stress that trading less is better than trading more. If you have an urge to trade, trade your demo account and if you see a possible trade that isn’t part of your everyday strategy, use your demo and continue to use it until it is part of your strategy. I understand there is no emotion with a demo account and that is why I use a demo in a very limited fashion. As far as time frames are concerned, this was just the opinion of a couple of the panelists. It was of their opinion that the whipsaws in the Currency Market made it just to difficult to make money consistently on a short term basis. Just out of curiousity, do you care to share your 5-15 min trading strategy?
I agree with you also about trusting others. Some of the speakers at the expo stated very clearly that it is ultimately up to you if you are consistently profitable or not. Just because you use someone else’s trading strategy doesn’t mean that it will work for you like it works for them.
Booker is ok. The only thing he really brought to my attention was how to trade the news or how he trades the news. As far as a mentor, he is just too busy and has taken on too many students to be considered that.
Hi Rich,
I don’t have a real trading system because none of them work all the time. Most of my trading decisions are based on chartpatterns itself and less on indicators because most of them are lagging. For example today, the GBP/USD looked good to me for a short (around 1.8500) because it was breaking good support; so I sold and made 24 pips in 8 min. When I sold the GBP/USD, I didn’t look to indicators at all.
I would recommend reading more about chart patterns and how to trade them rather to look much further into indicators because they won’t work that good.
I tried a lot of mechanical systems, bought or self developed, some looked very good but only work part of time. Really, I gave up on indicators since 2 years, before that, I was looking 3 years for the set of holy indicaotrs which were profitable most (all) of time but save your self the time because they don’t exist.
In my opinion, the only forex system which could work is an intelligent system that could read the news and analyze it, reading chart patterns and combine all these sources into a trade with stop, entry and limit and changing it’s parameters based on the current market conditions.
Now, I never found such a system and I doubt it can be developed.
If you are willing to succeed in forex, read about chart patterns and how to apply them, take your daily calendar and read when the important news is going to be released, doing this way will make and save you a lot of money [b] [/b]:thumbup:
Wim. great advice because I actually stated that a couple of days ago how I was going to start just studying chart patterns on the EUR/USD and give up on the laggards called indicators. I never put a whole lot of time into just studying patterns but my charts now actually contain no indicators. Do you know of any decent places where I can read more about how to trade chart patterns?
AUD/USD is more suitable for swing trading since its profit margin for day trading is not that high.