Target is to get 100 trades using price action strategy
Law of Large Numbers
All trade entries and exits will be recorded.
Support/Resistance zones – Area of value (primary)
Trend lines and Channels – Grid on where price is potentially heading to or reversing at (secondary)
Customised Moving Average – Used as a dynamic trend line when in lack of a linear one, could be used to objectively define a trend
Fibonacci Sequences – Support for the analysis made
ADX – Value > 25 indicates a strong trend (increase success probability when the trend is strong)
ATR – Measure volatility for setting stops
HLHH or LHLL – Criteria of up/down trend with area of value
Stop Loss – 1%. You will never lose 100 trades in a row, therefore, you will not blow up your account in 100 trades.
Weekly chart must be in tandem with daily and 4H chart. Stop loss and target price could be determined on daily or 4H.
Trade the swing on weekly, trend on daily and 4H.
Identify if in a trend or ranging – If in a trend, note if it’s still strong or coming to an end. This is done by studying previous impulse and correction waves together with size of candles that formed mentioned waves. If ranging, stay out and wait for break out + pullback.
A reversal is only when the market structure is broken, at least on the 4H charts and supported on the daily. Otherwise, prevailing trend is still considered to be intact.
Outlook – List out currencies according to whether it is strengthening or weakening. For example, if the USD is on a massive uptrend and so is the Euro, don’t buy the EUR/USD even though analysis might give a buy signal. Instead go long on EUR/JPY or another secondary currency that is weakening. Remember, it is a pair trade. Therefore, you’re buying one currency and selling the other.
1. Support/Resistance zones (Areas of value)
2. Trend lines or channels (Secondary)
Plan to enter and exit must be made before the trade. No decisions should be made while the position is open.
List out trade plan using if-then syntax.
Start of with a “Test Water” trade and look to add further.
***Insert entry decision tree***
Alignment – [Weekly > [Daily > 4H] > 1H]
[Weekly] Identify S/R levels and recent candlestick patterns. If any, look to build a plan on it. Only focus on the latest swing.
[Daily] Objectively define the TREND with a linear trend line or custom moving average. Form a bullish or bearish bias depending on the trend and identify areas of confluence using S/R levels and Fibonacci sequences.
[4H] Ensure the market structure is in agreement with the daily. Look to enter at an area of VALUE on this timeframe.
[4H] Candlestick pattern or show of price rejection at area of value
[1H] Formation of market structure – Enter on next swing high/low
***Insert trade management decision tree***
1. Stop loss – 1% x capital based on timeframe >4H according to structure of the market with 2 barriers broken and 2ATR to take into consideration volatility
2. Risk:Reward – Ratio must be at least 1:2
3. Target profit – Next swing high/low
4. Shift point – When trade moves in favour equidistant to risk, shift stop loss to breakeven if any swings available for strategical stops placement
5. Trailing stop – Under higher swing lows or custom moving average
Entry: 104.3 | Target: 108 | Stop Loss: 103.8
1. 1% x capital loss
2. Break even
3. 2% or more profit
Another exit trade post with reference to entry trade post to be made with screen shots of chart.
Psychology – Discipline, Patience
I have made some observations about human nature and will have to strive to overcome them:
1) Being optimistic when losing, believing the markets will turn around in your favour and ending up holding on to losing trades way longer than needed. Worse still, cost averaging in what will be a vain attempt to try and curb losses.
Being cautious and pessimistic when in profits and ending up exiting winning trades way too early instead of adding more positions to maximise profits.
As a result, human nature maximises losses and minimises profits. If you can make a huge loss on one trade, why can’t you make a huge profit on another? This very trait stops you from doing so. A trader needs to overcome this and do the exact opposite by trading according to the charts in order to be profitable in the long run.
2) Hindsight trading, “should haves”, will mess up your psychology. No point regretting, search for better set-ups in the future.
3) Trading is highly contextual and opinionated. It is a zero sum game after all. Carry out your own analysis and take the opinions of others with a huge pinch of salt. They have as much chance as being wrong or right as you do.
4) Ensuring that you survive will give you a chance of winning.