This blog is dedicated to educating forex traders about parallel and inverse analysis, which almost all forex traders do not understand or use. If you study this blog carefully the amount of pips you make could increase substantially.
We use parallel and inverse analysis every day at www.forexearlywarning.com when we analyze the spot forex and also when making trade entry decisions using the The Forex Heatmap®.
have an old saying, “plan your trade and trade your plan”. Most forex traders
do not trade with a plan and they suffer losses or a long series of bad paper
trades. This article offers a specific step by step guide to writing a trading
plan for one currency pair or any number of pairs you wish.
Would I Write a Forex Trading Plan?
Try trading without one!!!!
trade the spot forex with a trading plan or without one, it is doubtful that 5%
of forex traders trade with a plan. You can also climb into your car with no
money, no gas or a road map and try to drive someplace 1000 miles away but you
will not get there. You do not have a plan.
one example of how many different things in life can go wrong due to a lack of
having a plan. Trading is serious because real money can be made or lost and
emotions are involved. Having a trading plan is essential before pulling the
trigger in a leveraged and volatile market like the spot forex.
who intends on trading any financial market needs a trading plan. Trading plans
have been used on all financial markets for many years, even very simple plans
are used for managing and re-balancing assets and portfolios of mutual funds,
as well as stock and commodities trading.
when retail trading started on the spot forex a few years back trading plans
were left behind and the focus has not been on trading plans in the forex
industry. The focus has been mostly on technical indicators, forex robots and
scalping and the results have been somewhat disastrous. If you look at
the top 1000 forex websites out there I seriously doubt if five of these forex
websites focus on trading plans. This is appalling and a sure sign that forex
traders are headed for problems.
years traders have failed trading the forex worldwide and large financial
losses are the end result. It is not okay, it is terrible. Not trading with a
plan causes psychological damage to traders and their hopes and dreams are
permanently lost. Having a trading plan can prevent this and is the first step
to getting your forex trading under complete control.
of forex brokers who are regulated and only act to execute trades, the
forex industry is in somewhat of a mess. Using a trading plan for trading the
spot forex is not a forex industry standard. A trading plan is something that
very few forex traders or trainers talk about and the few trainers that do
discuss trading plans do so in vague general terms like “you must trade with a
plan”. But then they offer no specifics as to how to write or prepare a
trading plan. This article is loaded with specifics on how to write a trading
plan and the traders who want to write trading plans need to make this their guidebook
for writing a trading plan for any currency pair you wish. To my knowledge this
is the only guide to writing trading plans for any currency pair on the
internet that contains all of the specifics you need.
all put some sanity back into the forex industry and always make an effort to
trade with a plan, if you want to learn how to write your own plan or properly
evaluate someone else’s plan who has the proper expertise, that’s fine too.
Move out of the bad habits perpetuated by other forex traders who for years
have been lost or looking for shortcuts and create your own good habits for
successful forex trading. Ignore the forex industry and write a trading plan
Currency Pairs Do You Want to Write Plans For?
are essentially two approaches.
Writing a trading plan for one pair or
2. Evaluating the entire market and choosing the best pairs based on the
focus on number 2. Some forex trainers and educators will tell you to
“focus on one pair” because they know that most forex traders trade the
EUR/USD. If any forex trainer tells you this politely tell them no and move
away from them as fast as possible because the trainer that tells you this has
likely never performed even one total market analysis much less written one
single trading plan in their life.
this article we will focus on “overall market analysis” and choosing the best
pairs, not EUR/USD analysis. The EUR/USD is not the forex. The EUR/USD is only
one currency pair in a market full of trading opportunities, based on proper
planning and market evaluation. If the EUR/USD is choppy and difficult to trade
but the GBP/CHF is in a solid trend we will identify this opportunity in the
overall market analysis and write a trading plan for the GBP/CHF. Forcing
trades into the EUR/USD every day is financial suicide. Especially when the
GBP/CHF is solidly trending and moving hundreds of pips. There are 28 currency
pairs comprised of the 8 major currencies that can use these planning techniques
scope and approach in this article is to perform a full forex market analysis
and prepare trading plans for the best trading opportunity available that
the market presents. Sometimes the best trading opportunity will be the EUR/USD,
most of the time it wont be. Forcing trade into the EUR/USD is wrong and the
road to failure. If you trade 28 pairs instead of just one pair, logically, you
can make many times more pips than trading one pair and have 28 times more
opportunities. Trading one currency pair completely limits the upside potential
and the forex profit opportunity.
scope of this article is now clear, we will teach you to analyze the entire
market and trade the best pairs and trends available based on the overall market
analysis, we will not teach anyone to arbitrarily force trades into a single
pair repeatedly, which will lead to scalping and the same set of nonsense that
has caused most forex traders to fail for many years now. In this article we
will learn to write trading plans for any currency pair comprised of the eight
major individual currencies.
The Trading Style You Are Planning For?
traders use three basic trading styles: scalping, swing trading and longer term
all forex traders are scalpers. The general definition of scalping is generally
entering a spot forex trade for less than 15 minutes to one hour looking for 10
or 20 pips of profit, sometimes even less. Scalpers usually focus on one or two
pairs. The entire concept of conducting a complete market analysis and trend
analysis followed up by a written plan is something they have never done or
is a defense mechanism for a lack of knowledge and almost certainly for lack of
a trading plan. People without trading plans and effective entry management
systems scalp the forex and they are trading scared. When you scalp the forex
your money management ratio is negative and eventually it will cause you to
lose your trading account. Even scalpers admit they do not enjoy it and admit
it has no future. Forex traders do not want to scalp, they want to make a lot
of pips, but they scalp because “other traders are doing it so it must be
okay”. It is not okay, do not fall into this vortex of ignorance and following
money management ratio of any trade is the amount of pips you expect to make
versus what you risk, the expected pips versus the initial stop amount is
negative with scalping. For each pip at risk you are not trying to make more
than one pip of profit. With scalping if you are right 50% of the time you will
lose your entire account. Do the math. If you ask forex traders if they want to
scalp they do not really want to do it but they go ahead and do it anyway. This
is greed and forcing trades into the market without a system at all.
do not know what they are doing, that is why they scalp, and they take on
incredible risks and they have no trading plan or methodology of verifying
their entries. Scalpers do not want to scalp and they wish they had something
much better. They know that the longer they scalp that at some point they will
no longer be able to do it. It will wear them down mentally while position
traders are hanging on to their trades for weeks at a time. Anyone who successfully
trades the spot forex has to hold onto their trades longer, even scalpers know
this but some of them will not admit it. When you trade the forex you must
leave your ego at the door.
to have the proper money management ratio in any forex trade entry you must
have a swing trading or position trading objective as your trading style. The
minimum goal is to hold onto the trade for one strong movement cycle in the
main trading session of the market or possibly hold on for days to weeks if the
market condition and trends will support this style. Swing trading works in a
trending or oscillating market and longer term position and trend trading works
in a trending market. Both methods have acceptable money management ratios. In
this Knol we will learn to write trading plans for swing to position trading,
not scalping. From this point forward we leave scalping behind and ignore what
is happening with forex traders.
opinion the proper way to trade the spot forex is swing trading or longer term
position or trend trading and the risk reward ratios clearly support
this. With swing to position trading your money management ratio starts
around +3 and goes as high as +50. For each pip you risk you expect to make
between 3 to 50 pips.
scope of this article and the techniques we will describe is to write a forex
trading plan with a basis of swing and position trading style trading. These
trading plans will always trading in the direction of the major trends on the
forex market. If you are interested in trend trading you can also read the
excellent book by Michael Covel.
Really Want to Write a Trading Plan?
Okay so you want to write trading plans every day, fine, I have convinced you.
Are you sure?? Are you ready to do what it takes?? This is where I will give
all forex traders an “out”.
to write spot forex trading plans takes alot of work and commitment over a long
time. Remember I said at the beginning of this article that you must have a
trading plan, but I gave you the option of using someone else’s plan or writing
your own trading plan.
choose to write your own plans you still must learn how to write them from
someone who knows how to write plans and has the experience and track record to
show you how. Hopefully this article will get you going in the right direction
so you can make the best decision for yourself and start some new habits.
why scalping, forex robots and technical indicators are so popular. They
require far less work than analyzing the entire market every day so traders
take the path of least resistance. This is also the path to complete and total
failure as a forex trader, as is the case with many other things in life. If
knowledge is power lack of knowledge makes you powerless. There are no
shortcuts to the pips. Scalping, robots, and technical indicators are
completely worthless and have victimized nearly every forex trader with
frustration and losses.
you can still get out of learning to write your own trading plans right
now. I am giving you a way out. But do not plan on trading the forex for long
if there is not a trading plan in front of you every day. It can be your
trading plan or someone else’s plan.
Should A Forex Trading Plan Contain?
trading plan should be simple and unambiguous. It should give specifics of the
pair to trade, the direction to trade in or the direction of the primary trend,
tell you if the market or that pair is trending or oscillating/ranging, and
have a price target if one can be identified. The plan should have some kind of
alert system for notifying you that it may be time to enter the trade. Finally,
it should give you a set of exact conditions under which the trade entry can be
should also have a rationale or logic path that is based on a total market
analysis and the trade plan rationale should be easy to verify by any
intermediate level trader with very simple forex trend indicators. In other
words anybody who shows you a spot forex trading plan should be able to
back it up or explain it relatively easily to another trader with their overall
assessment of the market and a natural logic path that led to the plans. No
secret formulas, no secret algorithms or secret robots, just logic
about the overall market condition like upcoming strong news drivers or market
choppiness can also be inserted into the plan. Examples of simple, straightforward,
fully verifiable trading plans are included in this article.
Indicators Should I Use to Perform My Market Analysis?
simple set of trend indicators like moving averages should work fine, as long
as the indicators are set up and can be used across multiple time frames.
out this set of free trend indicators and they should
work fine for you. Remember that you conduct the overall market analysis with
these indicators and as you conduct your analysis you will be writing down
notes on your observations. When you review the last currency pair and go back
and read over your notes the current market condition will begin to become
obvious (i.e. what pairs or groups are trending, choppy, consolidating, at
support or resistance, inside support/resistance zones or clusters/layers,
etc.) and the trading plans will be nothing more than a formal write-up of your
analysis notes. Your analysis consists of cycling through the pairs and
observing and gathering market information pair by pair, individual currency
group by group and time frame by time frame using these indicators.
Analysis Techniques Should I Use To Prepare Plans?
market analysis technique we will use is called multiple time frame
analysis. Multiple time frame analysis of trends (MTFA) is your main
analytical method to develop written trading plans. Knowing the trends of the
market is essential to drawing up a plan. If you have not read the article on
multiple time frame analysis that is part of this 5 part series it may be best
to stop at this point and go read it carefully and set up the free indicators
because these are the indicators we will use to analyze the forex market and to
prepare our daily trading plans.
with MTFA you should analyze support and resistance levels across the time
frames simultaneously as you inspect the trends. And finally you should
analyze the pairs and time frames in individual currency groups. For example
all of the USD pairs should be analyzed together using MTFA, then all of the
CHF pairs, then all of the GBP pairs, then all of the JPY pairs, etc.,
continuing through the 8 major currencies. We will analyze the eight major
currency groups, each pair within a group, then group by group, in the plan
development process and the complete list of pairs is below.
purpose of analyzing support and resistance simultaneously as you review the
various trends and time frames is that you want to compare resistance and
support levels across all time frames, pair by pair. Analyzing the pairs in
groups like all of the USD pairs together, etc., allows you to see what
individual currency is strong or weak so you can more effectively draw up your
plans. Analyzing pairs by individual currency is called parallel and inverse analysis.
MTFA with these techniques on groups of pairs is how you draw information out
of the market to determine how to write a trading plans based on market logic,
not crappy technical indicators which account for none of this.
Now that you know what market analysis technique we are going and your
indicators are set up lets draw up the steps to preparing a plan.
1 – Read The Instructions
get off track for any reason go back and read this article again to get
re-centered, especially when you are starting out and until the good habits of
daily market analysis are built. Use discipline and focus.
2 – Inspect Largest Time Frames First
Inspect and review the four major time frames on the trend indicators I have
provided you with across all 28 currency pairs. Surprisingly, after you do this
for a while it starts to get easier and winds up taking only about 30 minutes
to do. If you get this far and do it every day you are already ahead of 95% of
forex traders because you are operating with substantially more information. It
does not mean you will be a successful trading plan writer just yet, that takes
some experience, it just means you are now on track and moving down the
right path to be a consistent plan writer and the good habits of total market
analysis are now starting.
major time frames/trends to inspect and review are:
H1 – one
hour per time frame (bar)
four hours per time frame
D1 – one
day per time frame
W1 – one
week per time frame
NINE TIME FRAMES
Click on Any Image to Enlarge
In certain situations you may have to
also review the MN time frame (one month per time frame) but on a day
to day basis its not really necessary.
This is the list of currency pairs that
you should inspect the four major time frames on. There is some
flexibility on the exotic pairs. You can add additional pairs or
substitute certain pairs on the exotic (non USD) pairs depending on what
pairs are available to you on your charting platform from your broker:
You review each currency pair twice,
because each currency pair has two sides. For example the EUR/USD should
be reviewed with the EUR pairs review and then again with your USD pair
review, remember each currency pair is composed of two individual
currencies. Remember that reviewing the four major time frames/trends on
these pairs takes surprisingly very little time, about 30 minutes once
you get the hang of it. It takes even less time if you only review the
H4 and D1 trends. You could easily do this twice per day and at the same
time be incredibly far ahead of all of the ignorant forex traders who
persist in scalping one or two pairs. For full time traders this is an
absolute must and there is no excuse not to do your daily drill down of
USD PAIRS GROUPED TOGETHER FOR ANALYSIS
Click on Any Image to Enlarge
This image above shows how to set up all
of the USD pairs side by side for analysis, next you set up the JPY
pairs side by side, then the CHF pairs side by side, etc. through all 8
major currency groups.
Step 3 – What To Look For on The Larger Time Frames
When you are inspecting the larger time
frames you need to observe the overall shapes of the charts with some
emphasis on the most recent time frames and determine which pairs are
trending or oscillating, consolidating and retracing, in tight ranges,
smooth cycles or choppy movements.
Trending means that the H4 chart at a
minimum or better yet the D1 or W1 time frame is in an established
trend or about to start one as the green and red lines intersect. H4
time frame would be for swing traders, the larger time frames would be
for trend and position traders.
EXAMPLE OF ESTABLISHED D1 INTERMEDIATE UPTREND IN PLACE
An oscillating pair is one that is cycling up and down in a range between support and resistance on the H4 time frame or larger.
Remember that the higher time frames
always overrule the smaller ones. If the largest time frames are not
trending the smaller time frames are likely oscillating in a range
between support and resistance.
Always inspect the entire time frame
from left to right and remember that the smaller time frames only form a
portion of the larger time frames to the right. For example the entire
H1 chart is equivalent the right 1/4 side of the H4 time frame, and,
equivalently, the H1 chart magnifies the right 1/4 side of the H4 time
frame. Apply this logic to all of the time frames to see how any time
frame can build a larger ones to the right.
Step 4 – Conduct A Parallel and Inverse Logic Check
As an example if you review step 1 to 3 and all of the JPY pairs are in downtrends, then
the JPY is strengthening across the board and its best to plan in that
direction. This simple logic available to anyone but ignored by nearly
all forex traders. Similarly if you review all of the JPY pairs and none
of them are trending, they are all oscillating in tight ranges and
choppy, you could just choose to not trade any pairs in the JPY group
and look at other individual currency pair groups for potential trades.
For example you could move onto the GBP pairs to look for opportunities
next. Don’t over complicate this incredibly straightforward way of
thinkingabout how the forex works.
After you have determined what is going
on with the larger time frames in the JPY group, then if trading makes
sense you can look at the smaller time frames and intraday support and
resistance numbers to estimate your price alarms. Set your trading plan
in writing from there.
Step 5 – Set Price Alarms
Earlier in this article I directed you to one of my other articles about support and resistance. After reviewing this you will have a
much better idea how to proceed with setting price alarms on your
trading platform. Here is the short version. As you are review the larger time frames
in steps 1-3 you should also be checking areas of support and
resistance on the larger time frames as well. In the example we used
above if all of the JPY pairs are in downtrends you can now check the
smaller time frames for intraday support and resistance and set price
alarms on the various JPY pairs (support alarms in this case since they
are all in downtrends) to assist with preparation of your sell plans.
Step 6 – Check the News Calendar
News items alone cannot determine when
to trade, news items can move currency pairs with the trend or against
it on a short term basis. Trading the news alone is foolish and risky
and millions of dollars in trading accounts can and have been lost by
trading the news alone. Also, its just not necessary. 80-90% of solid and sustainable trade
entries occur after the start of the London session and through the USD
session due to the large volatility and market participation.
Volatile news items that are scheduled
for the upcoming main trading session that could affect market movement
are easy to check and part of our planning process. A link to two free
news calendars we like is at the bottom of this article. Knowing when the
market can move is part of any trading planning process.
Step 7 – Estimation of Pip Potential and Risk Reward Ratio
Before you enter a trade and as part of
the planning process you will identify the short term and long term
support and resistance BEFORE you enter the trade. If you enter a buy
order and the next resistance is 100 pips away and you start with a 30
pip stop your short term pip potential is 100 pips and your risk reward
ratio is 100/30 or 3.3 to 1 positive. If you do this in the planning
process you can make a decision up front whether or not you even want to
consider taking the trade at all based on the known risk/reward ratio.
If a larger time frame is starting a new trend risk reward ratios can be
as high as 50:1 positive . If the risk versus reward ratio is
unacceptable you can decide not to trade the pair you are considering on
an up front basis based if the pip potential is too low..
Some thoughts on Step 7
Knowing the pip potential of a trade
before you enter is part of the planning process. Traders who scalp the
forex market or use robots are entering trades arbitrarily without this
information and are absolutely doomed for failure. Scalpers and forex
robots are working on negative money management. This is a huge
difference for trade planners who can opt out of any trade before the
trade ever happens. Its a matter of looking at a few charts. Traders who
plan well are totally different from this scalping mentality and they
know the risk and reward ratios up front. Trade planners are planning
for two hours and trading for two minutes, which is exactly the opposite
of what most forex traders (scalpers) do.
There is an old story about how Abe
Lincoln was given 8 hours to chop down a large tree and he spent the
first 6 hours sharpening his axe. This is NOT how forex traders think.
If you spend a lot of time analyzing the market and planning your trades
the actual trade entries get a lot easier. Forex traders need to “sharpen
their axe” before trading.
When Is The Best Time to Write A Plan?
The forex market essentially has two
trading sessions, the Asian session and the main session which is the
combined European and US session. 80-90% of strong and sustainable
entries are in the main trading session. The main trading session is by
far the best time to trade the forex market. Some pips are also possible
in the Asian session but forex traders need to learn how to trade the
forex in the main session first because this is where they will succeed.
The best time to plan your trades is
several hours ahead of the start of the main trading session when all of
the pairs are consolidating. A trading plan should be completely
finished several hours ahead of the start of the main trading session.The
main trading session starts about 4-5 hours before the US stock market
open until about 1 hour afterward. Most sustainable forex trade entries
occur during these times.
PICTURE OF MAIN TRADING SESSION TIMES AND VOLATILITY
Click on Any Image to Enlarge
It is also possible to do some planning
ahead of the Asian session. The procedure is roughly the same and you
would check the trends following the same seven steps listed above and
check to see what pairs could be trending or oscillating. An example is
if the NZD has an interest rate decision coming in the Asian session and
the NZD pairs are clearly trending or oscillating you certainly can
write a trade plan towards that. Asian session currencies are the NZD,
AUD, and JPY. After you have been trading the main session for about a
year successfully then you can start to prepare plans for the Asian
session, that is the right experience level.
What Should My Final Trading Plan Look Like?
Trading plans should be simple,
unambiguous, and should be easily verified by any intermediate level
forex traders using a simple set of indicators like the ones we give out
in this article. Nothing complicated. Forex trading plans must be fully
defensible by the trends, time frames, and support and resistance levels
of the market and have price alert criteria as well as an entry
management criteria in the plan.
Here are two very simple trading plan examples:
Example Trading Plan #1
All of the JPY pairs are weak or in
intermediate term downtrends, the EUR/JPY is sitting on an intra-day
support level just above 140.00. Set a sell alarm here and when the
alarm hits in the main session verify your sell entry with JPY strength
across the board.
Comments: This is a simple and
unambiguous plan and anyone who reads this plan should be able to verify
the trends on the JPY pairs and the 140.00 support level and alarm
point in about 5-10 minutes by looking at a few charts. It should be
completely logical as to why you are considering this sell trade entry.
You also know that it is an intermediate term trend so you should be
able to hang onto the trade for as long as a few days or possibly weeks.
Information on how to verify the entry is included in this article down
Example Trading Plan #2
The USD pairs are all oscillating on
the H4 chart. The pairs are stalling at support and resistance now and
they could start to move tonight based on USD strength. Set a sell alarm
on the GBP/USD at 1.6450 and when the price alarm hits monitor the
market for USD strength with the Forex Heatmap®.
Comments: Once again this plan is
simple, its also logical, contains under 60 words but it can easily be
verified by some chart inspection in 5-10 minutes by any intermediate
level trader and this is all you need to trade with. Simple and
effective. Some people want things to be complicated but there is no
advantage to this.
Other Trading Plan Writing Tips
1) Establish a daily routine of writing your plans at specific times.
2) Always determine the major trends of the forex market with the larger time frames first
3) Use parallel and inverse pair groupings, i.e. overall EUR strength or NZD weakness, or whatever to help set up plans.
4) Always analyze currency pairs in groups (USD pairs, GBP pairs, etc)
5) Write down areas of support and
resistance as you drill down the time frames and set price alarms at
intraday support and resistance and in some cases longer term support
and resistance to establish targets
6) Final plans should always be written, no shortcuts here
7) Do not have predetermined bias
towards the market before you ever analyze it, let the charts tell the
story, stop doing what you want to do and let the forex market tell you
what to do, it’s a $4 trillion dollar per day market that does not care
about your 5 mini lots.
8) Organize your thoughts and market
observations in written notes as you drill down and review the charts
and trends then rewrite your notes into a formal plan.
9) Learn to pick up clues as you observe
the charts and time frames and jot them down in your notes and rough
plans, learn to be a good observer and detective. No substitute for
10) Rewrite your notes formally and
this qualifies as a plan. You will be surprised how the charts are
trying to tell you something every day you just have to become adept at
listening to and interpreting what the charts are screaming at you. Open
your eyes and soak it in.
11) The market is dynamic, things can
change, trends can start from nothing, trends can end today, pairs can
consolidate for days.
12) Take pride in your plan writing
skills, very few, if any, forex traders even try to write plans. You are
in a class by yourself.
13) Don’t treat writing trading plans
like it is work if you enjoy what you do its not work at all. If writing
plans is hard work for you or stressful then it is time to follow
someone else’s plans and you can still try to write your own plans at
some point in the future.
Trading Plan Entry Verification
As a forex trading plan writer you
basically have two modes of operation, The first mode is the analysis
mode where you are thoroughly analyzing the market using the techniques
described in the articlle. The second mode is the entry mode when you are
done with the analysis and monitoring the market and looking for an
entry point for possible execution of your plans. At this point your
plans are finished and you are waiting for the main trading session,
strong news drivers and price alarms to hit to see if there are any
valid entries today.
Setting your Trading Plans in Motion
Trading the forex is a stepwise process,
after you learn to write a trading plan then you paper trade the forex
with your trading plans. Then after some paper trading success you start
trading with micro lots or fractional mini lots, then over time one
mini lot, the multiple mini lots and then ramp up over time to full
scale lots. Build confidence as you go and don’t expose yourself
financially to losses until you have your entry procedures and profit
taking procedures down well. There is no substitute for experience. You
can make money trading micro lots and build up a small account and
learn the forex while working on entries and managing your exits and
Forex Trade Entry Verification
A typical trading plan should will some
type of price alert system. In this case I teach traders to set price
alarms at critical areas of support and resistance and these price
alarms are part of your trading plan. When these price alarms go off, or
the major news items on the forex news calendar hit in the main trading
session this is an indication that it may be time to enter a trade
because the market is moving. In order to determine if you should trade
that pair, trade another pair, or not trade at all you need to verify
your trade entry.
To verify all of your trade entries you
can use a real time visual map of the forex called The Forex Heatmap®.
This is a real time entry management system that is available to all
traders. It is not that difficult to learn how to use and it works
across 28 pairs in two directions.
THE FOREX HEATMAP® VERSION 3.0
Click on Any Image to Enlarge
snapshot is a portion of the Forex Heatmap® 3.0 that depicts a real time buy
signal on the NZD/JPY.
entry management system is highly effective, and a complete discussion of trade
entry verification and money management is available in another article that is
part of this five part series. A link to the article on entry verification is
at the bottom of this article grouped with all of the other links.
Your Plan Writing Skills Over Time
If you decide to write your own trading plans every day using these techniques,
congratulations, you are part of a very small group of forex traders, likely in
the top 1% who actually make the commitment to do so and strive to be the best
you write your first trading plans how do you know it is right?? The answer is
that you really do not know. There are no veteran forex traders you can show
your trading plans to who will review and critique your work every day to see
if you are progressing with your plan writing skills. It is pretty lonely work
and requires you to be mentally tough to get through this phase. But it is like
anything else you will get better over time.
write a trading plan it would be best to have a qualified and experienced trade
planner review your plans. This is a real problem because to find a mentor who
will do this for 6 months while you progress is probably impossible to find.
Even if you could locate someone to do this your first few trading plans would
likely be wrong or full of errors and having your work critiqued is tough to
deal with. You are basically a very bad plan writer at first, which is
a real problem because if you make the commitment to write forex trading plans
every day there is nobody there to mentor you and review your hard work, so how
can you progress?. This is why forex traders do not write trading plans. Some
alternatives are presented below.
Status of The Forex Industry
The forex industry is an unqualified disaster and the success rate or lack
thereof of forex traders is clear evidence of this. There is a desperate need
for forex traders to use trading plans but there is no structure in place in
the forex industry to solve this problem and mentor traders for the long term.
The brokers and regulators will not do it so lets just get real, it is not their
believe I have a solution that is workable. From 2000 to 2005 I worked for a
company called Globaltec Solutions. I had an afternoon webinar five days a week
where forex traders would submit trading plans to me for review. The
webinar room had a capacity of 500 people and the room was full every day. I
developed a set of rules and a template for writing trading plans using the
techniques presented in this article. Every day traders would email me their
trading plans and I would review and critique the plans. Most of the traders
were newbies, some were a little further along, almost all of them were
time after tirelessly reviewing their trading plans I mentored a lot of forex
traders and many literally became incredibly solid plan writers and profits
rolled in for many of them, we created some millionaires too. It was the most
unique forex mentoring class in the industry. These people became my friends
and this proved to me that forex traders really want to do the right thing and
write trading plans.
the initial trading plans submitted to me by some of my “students” in the daily
webinars were so bad I could not even read them on the air. Critiquing
new trading plan writers plans is brutal in a webinar setting because you have
to basically work with brand new traders and plan writers and tell them their
work is deficient. Some of my students were insulted by my reviews and humbled
by the fact that they were grownups in the forex first grade. But they did
learn that a bad trading plan is a bad trading plan and you will lose money if
you do not know how to write a good trading plan. I think they respected that.
A lot of
my students persevered and stuck with it and stumbled forward to preparing
accurate daily trading plans that were spot on and loaded with pips. Developing
strong trading plan writers was the goal in these webinars and we had some very
good success. Unfortunately, my employer, Globaltec, proved to be a very bad
partner in this endeavor and canceled the class in an attempt to build a profit
center from this trading plan webinar/training success.
beginning of this article I gave all traders the option of not writing trading
plans but give them a choice of reading someone else’s plans every day. Since
so few traders can properly develop and write their own plans this remains an
option for motivated individuals but this also presents most forex traders with
writes forex trading plans that I can follow every day??
The forex industry has a very long list of problems that goes far beyond the
scope of this article. The forex industry is almost completely devoid of any
reliable and commercially available services that resemble a proper and logical
forex industry service providers have “trading alerts” which are delivered by
SMS mobile device and have entry price as well as take profit and initial stop.
They can be as much as $500 per month for only four or five currency pairs and
if you examine them closely these services are scalping services with the signals
provided by ineffective technical indicators. Expect disastrous results.
alerts are not trading plans because the alert services do not explain how they
arrive at their entries. The techniques that they use to generate the alerts
are completely hidden but if you look closely at these expensive services its
nothing more than useless technical indicators. These alerts are for scalpers
and the money management is breakeven at best on each suggested entry. These
alert services are also very expensive. Alert services do not want you know how
they arrive at their signals because then their very expensive monthly fees
would disappear. Most alert services come and go every 6 months. They do not
teach you how to analyze the market and plan your trades they just give you an
alert and a reason to trade then hold you hostage for a large fee for what
basically amounts to scalping. If you use a service like this you cannot build
an analytical skill set.
A lot of
websites provide “market analysis” that can go on for pages about this
indicator and that indicator but absolutely no planning or verifiable entry
criteria, this is not a trading plan and once again useless to a forex trader.
trading plan is different. A trading plans is issued several hours in advance
of the start of the major trading sessions and can be fully explained and
verified by the end user using a simple set of indicators. Trading plans are
based on the entire market analysis and are logical. Strangely, this does not
appeal to a lot of forex traders. The reason is that because the forex industry
is so messed up that most forex traders heads are full of garbage and poison.
The concept of having a trading plan based on the logic presented here is not a
generally accepted part of the forex industry, even though it is a sound and
logical approach. This is a systemic problem with the forex industry and forex
realized what was going on in the forex industry I felt as if a low cost forex
trading plan service was sorely needed. So I started Forexearlywarning.com
six years ago and it has been a great experience. After six years in business I
still do not have any competitors. Forexearlywarning is a very low cost trading
plan service which focuses on the major trends of the market and verifiable
entry points across more than 28 currency pairs using the exact techniques
described in this article. The trading plans are inexpensive but there are also
some options for getting these trading plans free of charge with broker
arrangements. After six years in business I remain astounded at the lack of
trading plan acceptance in the forex industry and the lack of choices for forex
a very small but emerging group of forex traders who are interested in writing
trading plans, or, as an alternative, using a low cost reliable trading plan
service. Although the majority of forex traders are looking for shortcuts there
is a movement away from technical analysis and robots, due to the massive
financial losses. The movement now is towards trading the forex in a sensible
manner with techniques and methods that actually work and are transparent.
Having a reliable low cost trading plan service available has a lot of
educational value. Any trader who wants to write their own forex trading plans
can practice their skills over time and use the Forexearlywarning trading plans
for comparison to their work. Traders can try to write their own trading plans
and then compare their trading plans to the Forexearlywarning plans and attempt
to mimick or replicate them daily. This serves as a mentorship program.
include the same trend indicators that I use every day to prepare the
Forexearlywarning trading plans to my clients so they can attempt to mimick the
published plans. All of the educational materials are provided at no cost so
traders can learn plan writing techniques and try to become good market
analysts. Any Forexearlywarning client can attempt to mimic the
Forexearlywarning trading plans daily or occasionally depending on their
motivation level. The Forexearlywarning trading plans are 100% transparent as
to how they are produced so any forex trader can follow the trends of market
with us across 28 pairs. We enjoy doing it this way and to our knowledge we are
the only forex vendor that does it this way.
write your own forex trading plans you have gained an identity as a forex
trader, many forex traders have no identity and float from indicator to
indicators, method to method and stare at the computer all day.
very small number of spot forex traders trade with a trading plan in front of
them. Now it should be somewhat obvious as to what the reasons are for this. It
takes work over a long period of time to get better at it and most forex
traders quit because they are looking for shortcuts. A small amount of forex
traders who are committed to excellence are doing extremely well with daily
planning but not nearly enough traders are good at it. This is a forex
industry-wide problem and is a symptom of the larger ills of the spot forex
there are alternatives and all forex traders should strive to be good trade
planners even if they see the difficulties of trying to learn it on their own.
Always strive to be the most knowledgeable forex trader. Anything less will
result in stop outs and losses.
decide to try to write your own forex trading plans you may not succeed, but
even a partial market analysis daily will increase your trading accuracy and
awareness and it does not take that long to do. It may be best to get a
qualified trading plan service and follow their strategies and techniques
until you get better at it. I have provided inexpensive or free trading plans
to my clients for many years and I believe I am the only forex vendor who
offers forex trading plans in the entire industry. I do this to
facilitate the long term development of trade plan writers who are scarce in the
develop as trade planner takes time and will be very difficult at first if you
try it. I have found that there are a lot of forex traders who are very driven
to succeed as a forex trader and are willing to pay the price. Its a life skill
and the profit potential over several years is very strong. Trading with a plan
needs to become an industry standard on the spot forex and traders need to move
away from the currently available shortcut methods that lead to losses into
thorough forex market analysis and trade planning.