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You Must Follow Your Trading Plan

A new month is upon us as the summer months slip away for 2017 and a new season is about to begin.

Renewal.  A time where we can evaluate the old and let what doesn’t work slip away and have a fresh start.

In trading, nothing is more important than your trading plan.  Inside that trading plan is the result of hard back testing work where you have decided:

  • What makes up your trading setup
  • How you will get triggered into the trade
  • What time frames you will pay attention to
  • Risk management – per trade risk and overall portfolio exposure
  • Trade management

All of those points in your trading plan are held together by trading discipline and the understanding that you will lose.  Handling the losses in a positive way is about your expectations, reality, and your understanding of trading psychology.

They must all hold together for you to find success.

follow your trading plan


What’s The Big Deal?

I’ve been publishing free Forex signals (more like setups) for a while now and for many, they are a lesson in price action and bull/bear battles.  They are developed with the understanding of market mechanics and the actions of other traders.

My approach does not change.

I got to thinking when I was fortunate enough to get some comments in regards to some of the currency pairs.  It is so easy to be led off your path even though it is allowed you to have the freedom that many crave.

I found myself having respect for the person that commented.  I don’t know them but through the brief words, I could tell they have an actual process they follow.  Yes, I could be wrong but that is how it appeared.

I have my process.  I have not influenced by anybody but I guarantee that many that read this trading blog will deviate on the words of someone else.

Understand that what I am about to say is not bashing this commentator.  In fact, they have my utmost respect but I must use the words as a lesson to those who are easily led off their own path.


Elliot Wave Counts

I don’t use EW although I am semi-knowledgeable in that type analysis.  He clearly did his analysis and wrote that a currency pair was completing a wave 3 and also to be aware of the completion of EW on a daily chart.

As a trader with a plan, it is vital for you to ignore outside opinion when you trade.  If you don’t, you are prone to lack of consistency which is lack of discipline.

Without trading discipline, you will not succeed.


Time Frames I Don’t Use In All Analysis

I was prompted to the monthly chart of a currency pair which is not something I look at too often.  I can infer from daily charts what is happening on higher time frames and if there is any confusion, I will step up.

Often times there is conflicting information.  You must decide at those points whether you will stand aside or take the trade.

What I appreciated was this trader covers all basis.  Whether that has panned out over time to increase their results I do not know.  I would hope this trader has detailed records to ensure that this is not an extra step that is needed.

He spoke about a chart pattern (which I do use) and is was a bullish signal.  The issue arises if a trader has a proper short setup on their time frames but is then led of their path by a time frame they do not use.


Trading Is Not A Team Sport

The biggest drawback of trading forums is people jumping on the approach of others without a clue if that is a good approach.

My Forex trading blog is more about education and there are many trading strategies that traders can experiment with.  My trading setups are simply those that I am watching because:

  1. They fit a criteria I am looking for
  2. Price action and structure is hinting at a move
  3. I will not predict but will have targets in place never saying they will get there.  They are action zones using measured moves on other criteria

Some traders will trade the momentum from these setups.  Others will use entries using strategies from this website when price moves from the setup location

A forum  has a different vibe.  People will hype their strategy – for what purpose I don’t know.

But it is deadly to a newbie.  Or experienced trader.

The one knock against trading is it can be lonely.  I agree!  There are people that will use Twitter or Skype with their trading friends to pass the time – rarely to talk strategy.

You have your plan.

You follow your plan.

End of story.


Only Use What Matters

I want to show you how just using what is contained in your trading strategy is all that matters.

This trading setup is the 34 EMA with trend line trading strategy and the only addition is the ATR (average true range) which was used for the stop placement for the first trade.

I use a standard 14 period ATR times 2 added to high or lows of my setups for the stop loss placement.  It was used because price did pull back upon entry and I wanted to keep things objective.

This is the daily chart I am using and also using standard trend line drawing rules.

  1. This is the first valid candlestick after the trend line break and the 34 EMA cross.  An order to sell is placed under the lows and price pulls back but avoids the stop
  2. Price does break the 34 EMA and down trend line but there is no valid candlestick to take a long trade.  Also note that the EMA is sideways which may have you ignore a long setup anyhow.
  3. Price breaks lower with momentum, price turns green and order to short is place below.

There are 2 profit targets for both and I use Fibonacci extensions from swings for my targets.  You can see the full targets are hit with both trades and you would have added up over 3100 pips.

The key is – I used nothing but what the strategy called for!  It didn’t matter to me what the news was, what the higher time frames showed, or even major pivots.

I used only what the trading strategy called for.


Improve Only When Proven

That’s not to say you can’t improve on your trading strategy.  You certainly can if the testing you have done show an improvement in results.  You can’t simply add variables without testing them.

Perhaps during an extensive back test I may find that scaling out at support or resistance (major pivots) does improve the bottom line.  Unless you are going to be extensive, do not add them.


What About This Renewal Thing?

Back to the top here.

As we head into a new season, renew your commitment to be rigid in following your trading plan.

Go back over your results you’ve logged in your trading log for the year and remind yourself that you got them by being disciplined.

If those results are not what you expected, then find out what is causing the issue, test any changes and only then you can add it to your trading plan.

Want To See Consistency In Action?


2 thoughts on “You Must Follow Your Trading Plan”

  1. Dear Moderator,
    I made a comment and suggestion on Aud/jpy ,referring to how price will follow wave count 3 and it was initiated,but it is a pity there is no where charts i have critically analysed can be uploaded so that you can judge . I hope that will be put into consideration.

    1. Hi Kayode. I do appreciate your input. You can upload charts to any free hosting service and send over the link. I won’t judge them as everyone looks at things differently. My judgement however are based on extensive testing…statistics….not singular examples. AUDJPY can be looked at many ways including a simple A-B=C-D move and we are looking to complete the D part of the equation on the monthly. It can also be looked at as higher lows heading into resistance and a break of resistance which equals bullish price action. On the daily, a simple trend channel as price is pushing to hit the upper part of the channel. The most useful thing in my opinion for EW theory is the rule of alternation.

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