Help with trade plan

Hi I’m new to posting on this forum but am a long term reader, I have been researching for a year trying various strategies and reading lots and lots including the baby pips school. I have a trading plan but wanted some people opinions on it.

On a 1 hr chart basically I wait for a 10Ema and 20 ema cross, once I have this I trade buy or sell.
I only ever trade towards the 100ema.
I use price action after the cross to work out which bar to come in on waiting for the next bar agreeing with my trade.

Is there any logic to this or am I just lucky at times it seems to me knowing when to exit is more important and I don’t have a plan for this yet, any ideas?

Any advice much appreciated


Yes, some - for sure: you’re buying into a trending direction and using a basic price action principle to time your entry.

Those are both perfectly valid things, in themselves, to be doing.

However (as you rightly suspected) it’s sometimes a very long way from “having good entries, in principle” to “having a trading system with a positive net expectancy (or ‘edge’)”.

I don’t mean this impolitely, I promise, but what you’ve described is a very long way from being a trading plan. It’s a plan for [U]entries[/U], at best (and not a complete one). That’s not to say that it’s a bad one, of course.

Extremely good observation, there: it is indeed.

In the overall scheme of “what makes up a trading method”, I always think that “entries” are about 2% of what’s important and exits are about 8%.

I would suggest that you need to be thinking about the following (not an exhaustive list - just the “main stuff”) …

  • Size of targets and how to define them (maybe in accordance to the volatility? maybe ATR-related? maybe something else?);

  • Size of stop loss (similarly) and whether to move it (only ever in the direction of the trade!) and when;

  • How/when to exit (the general principle is that you should exit when the criteria of entering are no longer valid, but you’ll need to develop a list of reasons why that might be so, and some criteria for trying to determine in each case, as objectively as you can, whether that’s so);

  • Position-sizing (including whether and when to add to winning trades, but never to losing ones!).

Personally, I’d advise you, regarding your entries, to be using the moving average crossover (and slope, and divergence) to be “defining when you’re allowed to identify a trade with a view to potential entry” rather than “as an entry”, and working more on price action for the entry itself.

There are also some very good (non-indicator-based) price action methods of determining when to exit trades, but it’s important to aproach that subject appreciating at the outset that no system you use is ever going to be perfect, and that that doesn’t matter. There’ll always be some (perhaps many) trades for which an exit method different from the one you’re using would have been better, with hindsight, in that instance. This is normal, and not in itself a sign that you’re doing anything wrong. Regarding exits, just as is true of other aspects of trades taken, what matters is the collective outcomes of 300 trades, not the outcome of any individual, specific trade.

But at the very least, you’re thinking along good lines and asking good questions, here. :slight_smile:

what Lexy said

Sorry if I am being my useful dumb self here, but do you mean that you only trade price reversals back [I]towards[/I] the 100ema and not new trends breaking away from it? Interesting…

I am not sure about [I]more [/I]important but certainly exit strategy is critically important to optimise one’s trading. Premature exit is just as harmful to your trading ratios as too-tight stops. Both target levels and stop levels should be thought about, planned and managed as thoroughly as each other, and in combination with each other, to form a comprehensive exit policy (i.e. a money management policy). And trading a 1hr chart offers more opportunity for adjustment than e.g. 15m trading.

Perhaps there are two principle approaches to considering exit targets. One is to anticipate the peak of the move, which is the most profitable if correctly analysed. This is commonly based on tools like fib extensions, pivot levels, oscillators, etc and/or major support/resistance levels (including higher timeframes). The other is to close out when the move is over and has reversed. This can be based on e.g. trailing stops, crossovers on lower timeframes, RSI divergence, etc. But these methods can give up a lot of profit especially in fast markets.

With longer timeframes and multiple positions it is possible to combine both these approaches and close a portion of the position on a price extension target and the remainder on a move reversal signal.

Of course, as part of your overall trading plan you will have identified your risk/reward parameters for each trade and this will also influence your exit strategy. Naturally, your stop levels are also an integral part of your overall exit strategy for the trade.

Thanks for your advice, I have been basically outing my stop loss at the bottom of the last trough, I then move it to break even when I have two bars above the entry price. I tend to move it up one bar at a time moving it to the bottom of the next bar. I usually wait for a double top to exit, although I’ve have recently tried exiting half my position at the first double top and then letting the rest run till the next candle

I do only trade towards the 100ena as I kept losing the other way, although this could only be on the 8 pairs I have tried this with.

In relation to position sizing I have been using the online calculators

I havnt thought of adding to wining trades …

Thanks for all your help

What TURBONero said.

What Toekan said.

I am getting the impression i should listen to what

Markaria told me to do and listen to Toekan about what TURBONero said LEXY said :slight_smile: ok i’ll have a look

Exactly… :wink:

Yes these all can help you to make a better plan for your trade…

This makes sense to me. What you may not understand it that the market flows Ina wave over time. This is the up and down nature.

What you tapped into is balance of the market. It’s full of extremes. The cross over is the center. The next step is figuring out where to exit.

Using a Median Line you can isolate these fluctuations to find really good profit stops and profit targets.

Trade plan attached.