Developing A Trading Plan - Pt 4

Testing a trading Plan

Before they begin in the market, some traders find it helpful to 'paper
trade' the market for a while. This involves taking 'hypothetical' positions
in the market and then monitoring these to see what the outcome will be.

Before doing any physical futures trading at all, the first move is to start
by paper trading. A trading plan must be able to be measured. E.g. "I'll
risk no more than 2% of my capital on any given trade". It can't say "I
won't use too much of my equity for margin."

Traders whose systems are more technical in nature will 'back test' their
system against historical market data to determine the success of the system
in that particular market. A trading system can be as simple as a few rules
or as complex as a Black box technical analysis package. The key is that the
system matches your personal trading style. You can either create a system
from scratch or buy a readymade package. Either way it is advisable to test
the system with dummy trades before doing the real thing. Some experts
recommend 10 years of back testing with historical data (black box systems)
where as others recommend a shorter time span for the testing of a simpler
system. It is very important to perform your own testing on any 'off the
shelf' systems, and not rely purely on the seller's recommendations.

While all of these techniques are beneficial, prospective traders need to be
aware that simulated trading - no matter what its form, does have its
pitfalls.

Experienced traders will often say that there is no substitute for having
real money in the market. Depending upon traders own discipline, the way
they react in this circumstance could be very different compared to when the
trade was purely hypothetical. In addition, while a market's past
performance can provide some general clues as to its price behavior, there
is no guarantee that this will be repeated in the future.

Individuality

Trading plans are individualistic, based on such factors as personal
experience, education, risk capital and tolerance toward risk. For this
reason, trading plans may differ greatly from one trader to another. A
trading plan may work better with some people than others. Consequently, you
must develop a trading plan that works best for you. Among other things,
this requires patience, rigid adherence to the rules that you establish,
meticulous record keeping of trading performance (which provides valuable
feedback) and an open mind to try new methods. There are no guarantees of
profitability in the world of futures investing, but the discipline of a
trading plan goes a long way toward making you a successful futures trader.

Now let's look at some of the
SAMPLE TRADING PLAN (GENERAL SUMMARY OF MARKET ACTION)

Trading Philosophy / Trading Psychology:

I believe that Financial Markets are 100% psychology driven.Price patterns
are a reflection of the collective psychology of a large number of
traders.Trading psychology also a major factor in my own trading. It is
identified as my trading state. Fear and Greed are powerful enemies to
profitable trading and I can overcome this by training my subconscious mind
to be focused on following a defined trading plan versus focusing on wins
and losses.I am a disciplined trader committed to trading only for profit
strictly adhering too my trading rules, plan and standard operating
procedures.My style of trading is aggressive with my preference to trade
directional, and pattern set ups. I will trade full time as a day trader and
also seek other trading opportunities especially dealing with Options.I will
not have a bias as to where the market may or may not head, I will react to
the price, patterns and my tools as they present themselves applying my
trading rules.I trade what I see… Not what I think!I understand that I
cannot control the market, I can control only myself. My trading state and
mindset is the key to the success of trading. I must be rested, fit, healthy
and mentally alert. Accepting the stress of trading by keeping focused,
calm, disciplined and not distracted is essential for being a professional
trader.Losses are acceptable, not desirable but I can minimize them with
compliance to the rules, especially avoiding impulse trades and never being
in a trade without a plan or a stop.Trading is a business and I am here for
the profit.

Golden Trading Rules:
Check for Stops and targets resting in the Market then update or remove
them.Look left for previous structure.Always Set a Stop Loss.
Always!Maintain Discipline.Avoid impulse trading.
Trade with a plan and stand by the rules.Identify, Predict, Decide and
Execute (IPDE).Do not enter a market within 15 minutes after a news
event.Get S.E.T. (Stop, Entry, Targets) before every trade. (Know where and
how to Exit…)If I lose my ISP then call my Broker immediately and go flat,
then work on the technical challenges to get back online.Keep it simple.

Money Management, Risk Reward and Financial Goals:
I will trade 4 contracts as a unit maximum for the S&P e-mini.I will trade 3
contracts as a unit maximum in the Russell e-mini.For every $5K that I add
to my account I can add a contract to a unit. If I reduce my account by $2K
then I will reduce the contract size.Commissions, fees, charting services,
continuing education and other business related costs are considered
essential to trading.Risk to Reward is preferred a 2 to 1 ratio, but waiting
for the set up and trading the rules is paramount and given the opportunity
this standard is a guideline. My goal is to successfully net 9 combined
points per week in the market.My desire is to train for the FOREX so that I
can diversify looking for the best opportunities as I see them.

Daily Routine
I will only trade on days when I am well rested, relaxed and not mentally
distracted by matters that will divert my focus. I will spend at least 15
minutes relaxing to music or a form of meditation after a good nights rest
before trading.Conduct a Pre-Market Analysis myself, perform a top-down
review of the major markets and develop a plan of the day. The trading day
is from 9:30 a.m. (EST) to 4:15 p.m. divided into a morning session, lunch
and afternoon session.I do not trade for the first hour on Mondays.I do not
enter any new trades the last half an hour of the market hours (1545 - 1615
EST).After I have met my goal or the market is closed I will log my journal
and then spend quality time with my family.At some point before the end of
the day I will revisit the S&P trading day and back test my plan and system.

Pre-Market Analysis

Understanding that 70% of the volatility occurs during the first 2 ½ hours
of trading, this step is very important. The goal here is to recognize
probable entry or exit points.
Check for - and note important reports, events, and or news releases.
Include in the plan of the day candidates and times for probable heightened
price volatility.Look at Daily chart with ATR, 60 min and 13 min charts. Was
there expansion or contraction?Annotate the previous days high and close
with a black line.Determine Market Bias. Where is the price relative to the
Daily Pivot (Above the Daily Pivot is bullish bias, below the daily pivot is
bearish bias)Note overnight support / resistance levels, double tops/bottoms
and trends.Locate and note significant Swing Points.Where are the dynamics /
stops?Calculate the previous days Average True Range (ATR).Review the cash,
$OEX Globex and the DAX markets.Note the %ATR reached up until this
point.Review the charts of the top 10 stocks in the S&P.Top down analysis -
is underlying (Weekly)
(Daily) trend up, down or sideways? Is current trend with the underlying
trend, or against the underlying trend?Create a Plan of the Day (POD) and
Trade what I see with the POD outlining probable entries and exits.

Dailly Record Keeping

Every trade made during the day should be entered on a "Daily Trade Ticket".

This will allow ease in reviewing previous trades, noting errors that may
have been made in entry or exit setups and an audit trail of winners and
losers. The daily results will be tabulated each night, after market
closure, and entered on the Weekly Summary Sheet.

About The Author: Jason Brumbalow COO The Trading Authority
http://www.thetradingauthority.com

We Should All Be Grateful To Day Traders

Day traders play an essential and often uppreciated role in our economy. And
do not most things and events in life come back to the subject of "money ".
Day traders allow the stock market to put a price on the companies that are
a constant, vital part of our lives. We know these companies. As they touch
our lives in many ways. They build our homes, produce our food, make our
clothing and build our cars. They broadcast our TV show we watch and pipe
the internet as well as telephone and cable service into our homes. They
provide jobs for our friends and families. As an integral part of our
economic cycle, these are companies that need capital to develop the
products that will improve that will improve the quality of our lives in the
years to come.

The stock market allows day traders to put a price on these companies every
second of the trading day. By actively trading, day traders provide the
liquidity that is the cornerstone of our markets. Without liquidity,
companies would not be able to raise the money they need to produce the
goods and provide the services that we demand. Without liquidity, investors
would not be able to commit capital. It is this capital that allows these
companies to grow and prosper in our economy. And it is the day trader who
plays a pivotal role in creating the markets that allow our economy to
flourish.

Day traders add immense depth and liquidity to the stock markets. Liquidity
enables any individual, institution or financial institution to rapidly sell
its stock for fair value and that is a direct consequence of the large
relative numbers of day traders providing active financial markets.
Liquidity does not just mean a rapid turnover: it means a rapid turnover at
fair value. It could be said that anyone could sell a Rolex watch on the
street for $ 25 dollars, but this would not constitute or represent a fair
price for the product and therefore could not be said to represent fair and
present value. Thus to blow out product at prices below fair and reasonable
value does not constitute true and trustworthy liquidity. Other products of
wealth such as Real Estate or large expensive boasts may sits for many
expensive years before buyers appear on the market that are willing to pay
fair value for the product to be liquidated into cash... On the other hand,
the stock market allows trader to place a value on capital investments and
more importantly affords investors and traders the opportunity to enter or
exit their equity positions efficiently in an effective manner. The economic
functions of the markets, coupled with unparalleled liquidity and a myriad
of constantly arising new opportunities, communication tools and ongoing
technological advances make the stock market the ultimate way to speculate
and as well provide a value function of the value of assets as well as a
quick means of liquidation and accumulation of vital capital

About The Author: Amy F. Goodmann Senior Financial Analyst Forex Forex Forex
Forex frxforex@yahoo.com http://www.substantialincomes.com
http://www.listmymanitobacottageonline.com
http://www.forexforexforexforex.com

How To Start Trading The Forex Market? (Part 8)

HOW TO predict the Future ?

by studying the Past (Technical Analysis):

1) The best traders don't discount one or the other but understand that
having an understanding how the fundamentals influence market sentiment
gives him/her an edge over those traders who don't.

2) In my opinion, TECHNICAL analysis is the easiest and most accurate way of
trading the FOREX market.

3) "The number's don't lie" - all available information and its impact on
the market, are already reflected in a currency's price.

4) Prices move in trends - the foreign exchange market is mostly composed of
trends and therefore a place where technical analysis can be very effective.

5) History repeats itself - over time, certain chart patterns become
consistent, predictable and very reliable. The question is SEEING them.

PRICES MOVE IN TRENDS

The traders who don't believe this obviously have no need to implement a
trading methodology on technical analysis. But, research has shown that
those who trade "with the trend", greatly improve their changes of making a
profitable trade.

Finding the prevailing trend will help you become aware of the overall
market direction and offer you better visibility,especially when
shorter-term movements tend to clutter the picture.

HOW does technical analysis help to determine what the trend is and HOW to
trade with then trend versus against it?

Even though, you learn you how to use and read various technical indicators
to identify a long- term trend, spot predictable chart patters and use
certain rules to enter and exit a high-probability trade, and even though a
ll this involves sound logic, parameters, methods, formulas, data, and
research, these technical indicators, by themselves, are not the Holy Grail
of FOREX trading.

It takes discipline and emotional control to stick with trading following
through the inevitable market ups and downs. Keep in mind, good technical
traders expect ups and downs.

Which technical indicators are the BEST?

NONE - technical indicators should simply be components of your overall
customized, personalized trading system, and not a stand alone system.
The objectives as a FOREX Technical Trader are:

1) To figure out the price action of the currency pair. Price is the main
concern. If the EUR/USD is at 1.2224 and goes to 1.2020, 1.1980, 1.1940- the
market is in a down trend.

Despite what every technical indicator might predict, if the trend is down,
stay with the trend. Indicators showing where price will go next or what it
should be doing are useless.

A trader should only be concerned with what the market is doing, not what
the market might do. The price tells you what the market is doing.

2) Always remember that technical indicators are only giving you
confirmations based on what the market is telling you. So listen to the
market and let it tell you which method, strategy or techniques you should
use.

About The Author: Veteran Trader Martin Maier is the Founder of
http://www.fenixcapitalmanagement.com .He is the developer of various
futures and commodities trading programs and has received many Trading
Awards.

Forex Trading: Do You Have It In You

Forex is short for Foreign Exchange, where money from one country is
exchanged for that of another or the simultaneous buying of one currency and
selling of another.

When one deals in forex trading the profit or loss, he incurs is the
increased or decreased value of an investment caused solely by currency
movements. For example, if an investor thought that the US dollar was weak,
he might purchase German Mark. The investor's, the real profit or loss could
then be in how the Mark moves against the US$.

Being the largest financial market in the world, the Forex market has a
volume of more than $1.5 trillion daily. Also the Forex market, unlike other
financial markets, has no permanent location, no central exchange and just
happens 'Over the Counter.' It operates through an electronic network of
large banks, central banks, currency speculators, multinational
corporations, governments and other financial markets and institutions.
Retail traders are individuals who are a small part of this market. They
participate indirectly through brokers or banks.

The foreign exchange market is unique because of its trading volume, the
extreme liquidity, the large number and variety of traders in the market,
its geographical dispersion, its long trading hours i.e. 24 hours a day and
a host of factors that affect exchange rates etc.

Currencies are traded against one another. Each pair of currencies are
traditionally noted as XXX/YYY, where YYY is the ISO 4217 international
three-letter code of the currency into which the price of one unit of XXX
currency is expressed. For example, EUR/USD is the price of the euro
expressed in US dollars, as in 1 euro = 1.2045 dollar.

73 % of the forex trading is done by 10 top international banks. These large
banks continually provide the market with both "bid or buy" and "ask or
sell" prices. The difference between the price at which a bank or broker
will sell and the price at which a broker will buy from a wholesale customer
is called the "spread". This spread is very less for actively traded pairs
of currencies, usually only 1-3 pips. One pip is the smallest unit of price
move used in forex trading. For example, if the currency pair EUR/USD is
currently trading at 1.4000 and then the exchange rate changes to 1.4010,
the pair did a 10 pips move. The pip is the smallest unit regardless of the
fractional representation of the currency exchange rate.
Thus, 1.3000 to 1.3010 is the same move in pips terms as 110.00 to 110.10
For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203. Minimum
trading size for most deals is usually $1,000,000.

Whew! What a market!

About The Author: NamSing Then is a regular article contributor on many
topics. Visit his other websites at
http://www.forex-foryou.info/sitemap.html,
http://www.forex-foryou.info/forex-broker.html and
http://www.forex-foryou.info/forex-trader.html

How to Find a Successful Forex Trading System

How to Find a Successful Forex Trading System The Foreign Currency Exchange
Market, or more commonly known as the Forex market is the largest financial
market in the world. Over $2 Trillion dollars are traded on the Forex market
every day. Forex traders make money in the currency exchange market by
playing one currency against another. They play currency pairs and bet that
one currency will either increase or decrease in value and the other
currency (or cross currency) will go in the opposite direction.

As I mentioned, Forex traders trade currency pairs. For example a trader
might play the Euro against the US Dollar (EUR/USD pair). If the trader
thinks the EUR will increase in value over a certain period of time, the
trader will go "long" the EUR/USD pair. If the trader goes long this
currency pair, he/she is betting the EUR will "increase" in value against
the USD. If the trader is right, they make money. If they're wrong, then
they lose money. Successful traders always employ a good forex trading
strategy so they consistently profit from their trades.

There are two ways to play the Foreign Currency Exchange Market that all
experienced Forex traders use. One is called Fundamentals and the other is
called Technicals.
Fundamentals refer to news events that move the markets.
For example if a country increases interest rates, then most likely that
will cause the currency to increase in value. If a country releases poor
housing numbers then that could cause the currency of that country to
decrease in value.

The technical side of trading the Forex markets refers to using charts and
indicators. Price charts and other technical tools are used to determine a
possible trade.
Indicators like MACD, Stochastics, moving averages and more are just a few
of the tools in the technical traders toolbox. The best Forex traders use a
combination of both fundamental and technical trading. Great traders never
rely on just one side.

Some traders trade longer term and some trade short term. A long term trader
is considered a position trader. Position traders take a longer term
approach to trading the forex market. For example if one currency looks like
it could be bullish over the next few weeks or months, they may place a long
position trade and let it ride for weeks or months until they exit their
trades to take profits.

Traders who take a short term approach to trading are considered day traders
or intraday traders. These traders only have open trades for a short period
of time and most of these Forex traders open and close their trades in the
same day or within hours. Most technical traders don't like to have open
position around news time because some major news events can actually cause
a great technical trade to fail because of an unexpected news surprise.

No matter what style of trading you use, as long as you use a great forex
trading strategy and stick with the rules of those strategies, trading the
forex market can be a very profitable way to make a living. Not only is a
good forex trading strategy important but good money management plays a big
role as well. As long as you manage your winners and losers and set the
appropriate stop losses and profit targets, you will quickly find that
trading the Forex market can be a very profitable business.

----------------------------------------------------
Andrew Daigle is the owner, creator and author of many successful websites
including ForexBoost at http://www.ForexBoost.com , a Free Forex Training
Resource for the Novice and Advanced Forex trader.

Global Forex Trading - The Easy Way To Make Money

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Forex Trading Advantages

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Another advantage of forex trading is of course the fact that it is global
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Prior to reading this information you may have assumed that forex trading
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about forex trading on LeanderNet - http://www.leandernet.com