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How do i know it is the right time for me to take position in the market? is there a procedure one should follow before entering a trade, pliz help?
Ok, different traders have got different strategies they use to trade and so as setups.For instance according to my strategy, i only take position when an engulfing forms at the level 38.2 of the Fibonacci retracement level and closes below for a sell or above the level for a buy. So what does this mean?
Take position when your trading setup confirmation has all the qualities for your strategy according to your trading plan. Of course there are qualities/characteristics you always consider for a valid setup. Follow your rules and enter a trade only when those qualities show up to give you a confirmation.
I hope this has been helpful.
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How do i know it is the right time for me to take position in the market? is there a procedure one should follow before entering a trade, pliz help?
The right time to take a position in the market should be that time when you see a confirmation on the setup according to your trading strategy. It should be in line with your trading rules under your trading plan.
If I may give an example on how I know I should take position;I trade breakouts on triangles and wedges, I only take a trade/position when price gives a retest after breaking.
What do I consider for my entry confirmation:
Retest.
The retest should not break the level again to the opposite side.
Candlestick pattern formation
The confirmation candle should close in the direction of my trade.
The setup must have a minimum of 1:2 risk reward.
These are my trading rules. Take a position by following your trading rules.
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Thanks for bringing up that topic Ravens,
A trading plan and trading by rules is one of the most important thing toward consistent trading but most challenging to most traders. I can personally say my first year of trading, it was not easy to bide by my trading plan rules and this costed my account a lot.
What should be included in a trading plan?
Before that,the most important is that, a trading plan should reflect who you are, your goals and your life as a trader.Before making a trading plan, you should know the kind of a trader you want to be.
How much time you can dedicate to forex trading. Level of commitment and Patience when holding a trade and your level of risk.What should be included in a trading plan?
Trading strategy,Entry point, exit point, time frame, risk management rules, dos and don’ts, decisions taken before, during and after taking a trade,what makes your strategy a failing trade and a trading journal.
How is a trading plan related to trading?
It provides guidelines to follow while trading.
Acts as a guiding map for the whole process of trading.
It tells you what to do, when to do it and how to do it?
It helps you to control the possibility of making big drawdowns hence protecting your account from big big losses.With a trading plan, you are able to trade emotionally free because you only follow the rules.
However keeping the rules is not easy but when you have learnt how, you will be able to profit consistently.
Hope this material has been helpful.
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A trading plan contains a set of rules, list of steps to be followed when . With your plan you should be able to answer questions like how, when, where, who and what.
For example
How do you take a trade(trading strategy)?
How much time do you spend holding a winning trade compared to a losing trade?
How long can you hold a trade?
How many trades do you take on each trading day?
How do you identify a losing trade?When do you enter a trade?
When do you cut your losses?
Where should you set stop loss?
Where do you take profit?
Who makes a decision to take a position?
What is your risk to reward ratio?
What do you do when a trade turns out to be a wrong trade?
What size should you use on my trade?
What makes the setup more valid with higher chances of success?
What do you consider to make a decision before taking a trade, during and after taking a trade?
What kind of emotions do you get before, during and after closing a trade.
You should be able to answer the above questions correctly every time you make a step to open a position in the market or trade.
This helps you to trade and profit consistently and at the same time it keeps your feelings an emotions intact.
Observing your rules helps you to protect your account from big losses and makes you a discipline trader.
Having a trading plan and following your trading rules doesn’t mean you won’t lose on a trade. Losing in forex trading can’t be avoided. But this helps you to minimise your losses and still stay in profits.
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A trading plan guides you in the whole process of trading.
It contains your trading strategy, describes how your trading setups should look on the market chart.
It tells you when to enter a trade and when to get out.
It tells you which trading setup you should take and which you should not even if it has some of the qualities and why?
It tells the size you should use on an individual trade and why?
It tells you where you should put your stop loss in regard to take profit.
It tells you what to do in case a trade goes against your direction.It tells you what to do before taking a a trade, during and after closing a trade.
In conclusion a trading plan is a guideline to a trader. Without it you are likely to get confused in your journey of trading hence susceptible to big losses, account blowing, emotional trading and lack of self confidence and discipline.
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