hey all. I’d like to consult with you all about a situation I’m sure you’re all familiar with.
Every once in a while I find myself spotting what seems to be a great trading opportunity, however, it does not necessarily meet my trading system.
[B][U]A hypothetical situation:[/U]
[/B]
I’m browsing a major pair my system doesn’t include, and see a beautifully accurate head-n-shoulders pattern suggesting a trend reversal (bullish to bearish). I also make sure on a larger time-frame that the main trend really is bearish, and I’m feeling very comfortable with my analysis (using other indicators maybe). I even read one of the columns on babypips.com in which an admin seems to agree with my ideas.
I decide to keep following the pair.
[U][I]Several canles later…[/I]
[/U]I spot what seems to be a break out, suggesting price would continue to drop to a profit of (lets say) 50 pips.
I also spot a great resistance area only 20 pips away from current price.
[U][I]All in all…[/U][/I]
lets also assume, that this trade DOES meet my money-management rules.
this potential trade idea looks very promising with relativly low risk and high reward, yet my trading system does not apply to situations like this one.
[B][U]so my question to you is:[/U][/B]
would you find it possible to enter a trade (after thorough analysis, of course) even though your trading plan doesn’t refer to these specific market conditions?
I know planning your trade and trading your plan is A-B-C in FX trading, but
I’m wondering what’s the point in these “potential trade ideas” I see every now and then, if we all must always stick to our own systems…
As you said it yourself planning your trades and trading your plan, you should never defer from your trading plan. However, if you really want to trade those special situations that come out once in awhile, you should have a separate trading plan for those situations (A lot of times myself I would identify many different situations where I was right 80%-90% of the time, however I don’t trade them and I do not spend too much time on them because I do not have a trading plan for those type of situations. Also when you put the real money on those situations, it never comes out the way you have planned, because you don’t have a plan)
Thanks for the reply, Saint, but it still seems blurry.
How would one add to his\her plan the occasional trade opportunity when such opportunity could be one out of so many…?
Is there anyone on the forum whose plan contains the cases of the occasional trade opportunity? or maybe looks for trading ideas and tries to implement according to a certain plan?
this is exactly what I’m talking about, cadarkitek, is there a system which is not “do as I say”? how would you define a strategic plan? this kinda goes against what’s taught on this site, however I’m pretty sure there’s an explenation, since I don’t see why most of the pros bother posting their trading ideas and analysis if no one can use them since they don’t perfectly allign with one’s system…
I think a better term might be a contingency plan. In any arena where the events are out of your control and somewhat unpredictable, you must have flexibility in your planning. If there is the possibility that you will be trading in unfamiliar territory (different pairs) then you should have minimum requirements that will be enough to make you comfortable with your decision. This plan should have all the important requirements of your detailed pair specific plan while being generic enough to apply to any possible scenario that you might encounter. This kind of planning takes away some of the precision of a detailed, specific plan but allows you the flexibility to handle a wider variety of scenarios. This is also why I only trade one pair, I prefer to keep my situational awareness up as much as possible on a single pair and this is best done by being a specialist versus a generalist. My goal is to be able to trade one pair and do it consistantly and very profitably.
I think when starting out it is very important for newbies to stick directly to hard-lined rules, if for no other purpose than to instill certain disciplines as a trader. It’s important to separate emotions from your direct influence on your trading decisions. Following strict rules can assist with this.
After awhile when you become more comfortable, you can relax a bit.
There’s plenty of occasions when I violate “solid risk management” because I saw an opportunity to get into a trade.
I think its fine to take these trades because you are not taking them as part of your trading system. Its important to not break the rules while you are trading your system but noone says you have to have 1 system and only one. I trade 2 systems and I’m also following Tymens thread so I might be trading 3 by the end of it. I also take trades like you have mentioned, if they look good. I risk between 1% and 0.25% on these type of trades, normally about 0.5%
