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Another way to think about a trading plan is a business plan.The plan outlines how your business runs and operates.
Looking back at the Dollar Index chart and comparing it to the original screen capture, we can see the resolution of the bull flag was to the upside.
The resolution was fierce and the last candle is clearly showing momentum in the move.
The plan consisted of the following entry criteria and risk control. The plan now calls for seeing how price reacts as it has breached the low of 1.1098 where price reversed 400 pips.
We could see a failure test in this zone but that alone will not stop this trade for me.
A strong move and close could price me out of the trade depending on the size of the move.
That would result in a missed trade on a setup that I was anticipating given the information the charts provided. Price consolidates over weekend and on March 4 drops and brings this current portion of the trade to 167 pips.What occurs after a potential failure is what will determine the next course of action for this trade.The business plan allowed me to have potential trades lined up which would allow me to have a chance to enter a potentially profitable trade. The trade plan forces me to stay present and to aid in my ability to keep emotions out of the decision making process.Would they have a clear rule set that states exactly what course of action should be taken under each different set of circumstances? These things include what you trade, how you trade and how you manage those Forex trades.Also other super important parts of the plan you do not want to forget to include are how much you will risk per trade and what your goals are. Whilst you have your overall larger plan, you can have smaller checklist around your trade station to ensure you stick to your trading edge.Having a solid trading plan will ensure you are consistent in you trading and follow your rules – or not.Trading Forex is very different from every other job in the world because there are no rules.I used to be haphazard when it came to possible trades and consisted only of scanning charts on a daily basis. Even in this day of technology, I still prefer to make notes in a spiral book highlighting: The days of having a trade idea actually trigger without me on board are, for the most, long gone.The difference between the years really has been treating trading as a business and not a hobby or “something” that I do.These can be to remind you and help you stick to your rules.An example of one of these checklists may be for the pin bar.