Hello dear friends!
At the request of a regular visitor to the blog, today I’ll talk about how to draw up a trading plan and plan your activities in the financial markets. I want to note right away that this topic was partially disclosed in lesson No. 27, therefore, before continuing, I recommend that you familiarize yourself with this material. Have you read? Then let’s go.
People with rich life experience know that in order to achieve their goals in any field of activity, you must adhere to the plan. And trade is no exception. If you want to achieve something and earn money in this field, then you just need to learn how to plan and adhere to the developed rules. Otherwise, it will not be trading, but a game of roulette, which will bring nothing but adrenaline and permanent loss of funds.
Before proceeding to the creation of a trading plan, we must understand for ourselves that everything is interconnected in the market and the movement of quotes is influenced by both technical analysis tools and fundamental factors. For example, publishing economic data or speeches by politicians can lead to significant price fluctuations. And as a result of successful testing of strong support/resistance levels and trend lines on higher timeframes, a stop occurs and a subsequent change in the direction of price movement.
In order to take all this into account, I recommend using the algorithm of actions below.
- First, you need to decide on the assets that we will trade. If you are a novice trader, then it is better to look at the most liquid currency pair EUR / USD.
- We mark the time of the release of important economic news, speeches of politicians, all kinds of meetings, summits, meetings of leaders of countries that can have a significant impact on the prices of traded instruments.
To do this, you need to periodically review news publications, feeds, financial portals and blogs, economic calendars. This will help you to always be in the know and keep abreast of the market. How to use this information in trade depends entirely on your vehicle. For novice traders, I would advise refraining from opening deals during increased volatility.
- If we plan trading activities a week in advance, then before the start of the working week it is best to conduct a technical analysis on the older time periods H4 – D1. To do this, we take the tools that most traders use: apply strong support/resistance levels, trend lines, channels to the charts, mark current and emerging patterns. We select the most likely scenarios and then wait for a favorable moment to open deals.
As an example, I will give the EUR / USD chart. As we can see, on TF D1, the price is near the lower boundary of the correction upward channel.
On TF H4, sellers are testing the support level of 1.1345 and a bullish divergence has formed.
According to my TS, you can open a purchase with a small stop of 20-30 points. In case of successful development of the forecast, the profit will be 120 points, i.e. the profit/loss ratio will exceed 4 to 1.
Also, taking into account the data from the news calendar, I noted for myself the date of announcement of the interest rate and the subsequent ECB press conference, which should lead to increased volatility of currency pairs in conjunction with the euro. Depending on where the price will be located before this event, I will decide on the current transaction. It can be transferred to used or prematurely closed.
In addition to accompanying the current deal, I will closely monitor the rhetoric of the ECB head Mario Draghi, which can set the direction for the medium-term trend of the eurodollar.