Trading Plan 3.0

Plan the trade, trade the plan

My Overall Objective

In the next two years I endeavor to become a disciplined and consistently profitable trader. Since I keep working full time in front of my trading screens, my trade decisions are done during the day and I prepare technical analysis in the evenings and during the weekends. I will monitor myself  through this trading diary and I will draw conclusions from my mistakes.

Basis For My Trading

I trade breakout pullbacks entering reversals against countertrend pullbacks. My trade decisions are based on price action using multi-timeframe technical approach however I don’t limit myself to trade only from naked charts.
Trades are selected using candlestick analysis, trendlines, support and resistance levels. I use Keltner-bands and exponential moving averages as trendfilters. I use Fibonacci retracements and extensions, momentum and average true range for wave analysis.

Currency Selection

I will trade the following Euro currency pairs:

EUR/USD
EUR/GBP
EUR/CHF

Strategy Rules

The first step to start every trading day is checking the market calendar to see if there are any major announcement or macro data on the schedule that may cause an intraday volatility burst or an inactive, tight trading range. I prepare my action plan early in the trading day and follow it without creating a new opinion during market hours.

Primarily I use two charts, an intermediate timeframe to identify the underlying trend through price action and a smaller timeframe tactical chart for entry/exit timing. I will focus on the short term trend but I will also look at one higher timeframe to get a broader view of the market trend and to be aware of important price levels. For short-term trend recognition I use 4-hours and 1-hour charts while 15-minutes and 5-minutes timeframes for tactical trade decisions.

I trade pullbacks and I do not try to pick tops or bottoms. I look for a countertrend pullback which reaches the Keltner bands on the trend chart. Once the trend starts to show its strength again by breaking the trendline that containes the pullback I look for a small pullback (on the tactical level timeframe) to test this breakout and enter when a candlestick pattern provides a signal. I separate the signal bar from the entry bar to prevent an early entry before the completion of the trade signal. I prefer missed profit to lost money so I rather wait patiently for the right oppotunity.

Rules of engagement

  1. Spot the trend
  2. Wait for countertrend move
  3. Detect the trendline breakout
  4. Wait for pullback with candlestick signal

Money Management rules

1. I always use stop loss to protect capital and cut losses with strict discipline. I limit the maximum loss per trade to 1% of my trading capital
2. I check the risk/reward profile for every trade before the entry. I aim for minimum 1:2 risk/reward ratio (in other words 2R profit target)

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3 responses to “Trading Plan 3.0

  • Change in strategy « TheRoninTrader Project 2.0

    […] HomeAbout meBookshelfTrade perfomanceTrading Plan 2.0Trading Rules […]

  • Uknowme

    Hi,
    I just like your approach to trading.But please, what size of stoploss would recommend on the 10m timeframe for a trade?
    Thanks in advance.

    • theronintrader

      Hi,
      It really depends on two factors. First of all, the instrument you are trading. As a rule of thumb I use 1.5xATR calculated on the signal timeframe. That is about 50pips on the EURUSD and the GBPUSD.
      Secondly it depends on your trading style. If you are trading breakouts, you can use tighter stops (10pips) since the momentum should not turn against you on the entry bar. But if you are a swingtrader then a wider stoploss (i.e. 1.5-2.5 time ATR) should be employed because you have to leave the price ‘more space to breathe’.

      Regards,
      theronintrader

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