Trading Plan Unfolds On EURUSD

http://www.netpicks.com/trading-plan-unfolds/

With so many Forex pairs to choose
from, it helps to have a certain "look"
in the market that you seek out for an
opportunity. The same can be said for
other markets however Forex is
extremely scaleable for traders of all
account sizes.

It makes scanning charts a quick
exercise when you have a trade plan
that outlines setups and the conditions
that need to be present.

Seriously, you need a trading plan and
if you don't you have no doubt put a
road block up on your success.

There are so many things you can look
for including a multitude of patterns
and indicator positions. I like to keep it
simple by looking for markets currently
taking a pause in the trend direction.

Pause is not a technical term but
simply describes ranges or pullbacks
with a resolution.
It does not mean there is no
buying/selling taking place.

Trend is, of course, time frame
dependant and since I look for swing
trades, I focus (generally) on the
daily/weekly charts when looking for
structures and overview. Trades are
usually executed on lower time frame
charts but with the bigger picture in
mind when placing stops and targets.

IMPORTANT: It's not just the pause
but also what happened before the
pause.
Confused?

During one of my scans, I noted the
EURUSD had what appeared to be a
selling climax on the daily chart. That
move "stood out" and that's was
brought me to investigate further. It
happened as the currency pair is in a
down trend on this chart.

I fully expected price to "pause" (a
correction) and work off this move
before returning to the down trend. If
there were no other trading
opportunities across other markets, I
may have been tempted to trade the
corrective move.

Given the selling climax, I felt that the
climax would be filled in a complex
correction so there was plenty of room
for the trade to move.

To be honest, if the first pause, shown
with the red arrow, actually pulled
back a little further and was cleaner, I
may have four hour'd an entry.

The daily chart shows more of a range
than a pullback and I was on alert if
price was showing an indication that
downside break was close.

This chart is the four hour chart
because the details, while can be
inferred from the daily, are better
shown here.

The grey area is the range but as you
can see, price is holding highs and the
lows are getting higher. This buying
pressure at higher levels points to an
upside break.

The yellow arrow shows a smaller
range near the highs which is a sign
that the break will be to the upside,
not short. 180 pips later, the breakout
to the upside ends.

Now that the expected move has
completed, I had to rethink shorting at
this time due to structure that has now
printed on the chart.

1. The range prior to the breakout had
me wondering if the buyers that came
in at the range would hold prices if it
returned. After four days of pause
plus the break, it appears there is
strong interest in the buying
department.

2. Were sellers absorbed at that level
leaving little selling interest?

Given that information, shorts did not
appear to be the play at this time. The
plan was to sit aside on the first move
when/if selling pressure took over the
market.

Price broke to the downside and held
up right at the breakout level as you
can see on the daily chart. A few
things came to mind:

1. Will this spook those that are long
causing them to exit and drive price
down?

2. If price breaks the bottom of the
range and stops are hit, will I have
missed a great entry?

3. Will those who missed the breakout
trade the first pullback long?
For details, let's head back to the four
hour chart.

Price rallies but fails to hit the previous
high showing a lack of buying pressure.
Price heads into a range (seen better on
the 1 hour chart) and an order to short is
entered first at 1.1415 in error and then re-
entered at 1.1467.

All of this work is done rather quickly
but it takes a trade plan and knowing
what you are looking for to make it
work.

Breakdown
1. Looked for "something new" and
saw the sell climax in the EU.

2. Expected a correction and would
look to short the return to the trend.

3. Structure of price was not a clean
correction.
It was time to rethink the execution of
a short trade taking new information
into account

1. High probability of the move short
being held up at the breakout level.
2. Expect late buyers to enter and
bring price back up.
3. Look to short any sign of weakness.

The trade plan I follow outlines what I
am looking for when scanning. Each
individual trade has it's own trading
plan because while setups may look
the same, they can act very differntly.
Reassesing new developments for me
is key to deciding whether to pull the
trigger.

Did the trade trigger?
The trade triggered 6 hours later and
after some price drift, it broke and
didn't look back.

This type of trading relies on some
discretion but is also pretty rules
based in terms of what to look for.

The truth is this type of trading
evolved from system trading.
I bought my first real system in 2008
and no surprise, it was from Netpicks.

It taught me about rules and following
a trading plan instead of knee jerking
into every large candle.

It had me only taking strict setups and
taking risk seriously.
I believe it helped shape my thought
process about trading overall and
probably most importantly, it taught
me about being consistent.

Without consistentely taking the right
action, you will fail.

Take a look at
http://www.netpicks.com/trading-systems/
and learn more about what is offered.

Trading Plan Unfolds On EURUSD

Trading Plan Unfolds On EURUSD

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Trading Plan Unfolds On EURUSD