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Plan the Trade, Trade the Plan (29-10-2008) |
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Written by Ben
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Wednesday, 29 October 2008 |
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I've heard the catch phrase "trade the plan, plan the trade" thrown around a lot, intended to mean that you should have a definite plan as to what you are going to trade and how to prevent emotions becoming to involved and leading to you making stupid decisions. When I started a week or so a go I was convinced I had a plan and would be sticking to it, in retrospect what I had was a rough idea of what I might do and that was about it. Ah well, lesson one paid for and learnt. Read on to find out what I've learnt this week and what I'll be doing next.
My "plan" such that it was involved two main strategies. Firstly taking long term positions in two shares which I believe are undervalued, Autonomy and ITM power. Autonomy MWM already has a small stake in and ITM is on our potential buy list. This part of the plan was fairly succesful, ITM I have a one off position in to expire June 2009 and Autonomy I bought at 900 with further orders out to purchase at 800, 750 and 700 (subject to margin) should the price get forced down by any further sell off's. This position expires in March 2009.
The second half of the plan, and this was the vague bit, was to trade GBPUSD based on price action, mainly support and resistance, double bar high's/ low's and pin bars. I won't list all of the terrible trades I did on this plan but to cut a long story short my 'plan' was far to vague and I not only ended up taking extremely weak signals (double bar highish on a five minute chart anyone?!) but I also started trading both the FTSE100 and Oil; neither of which I had planned on doing. Looking back through them my biggest problem was boredom, now that I had the account to trade again I wanted to trade because it's more interesting having an open position that not.
The solution? My plan needs to be far more rigid to begin with, I know that price action around support and resistance works but only if I wait until perfect looking setups present themselves. With that in mind, here are the basics of the new short term plan:
- Instruments:
- GBPUSD
- FTSE100
- EURUSD
- GBPEUR
- Oil (Brent Crude)
- Timeframe
- Signals (Entry):
- Support and resistance levels marked on charts each evening
- Based on above support and resistane lines the following candle patterns will be used:
- Double bar highs or lows at the resistance zone, with the relevant levels within 2 pips of each other. Entry at the opposite end of the candle with stop 3 points above DBH/DBL.
- Pin Bars with stops 2 pips beyond the long end of the pin, entry on break of short end of the pin in the following bar. Invalidated if not breached by next bar.
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Exits:
- Exit at 1:1.5 risk to reward ratio.
I'll also be continuing with my long term positions as and when I find suitable companies but more on that in the Investment section. Next update will be when I find my first setup or failing that when the frustration of not finding any suitable setups all gets too much!
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Last Updated ( Wednesday, 29 October 2008 )
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FX and Trading 