Hi everyone,
I’m new to the forum and new to trading. I’ve been reading up on forex trading and working my way through the school of pipsology. I’ve opened up a demo account and have started to attempt to learn how to trade and come up with a trading plan.
Here’s the basic outline of a trading plan I’ve come up with that I would like to start testing in my demo account on Monday. I’ll be keeping a trading log to track my results. I’d like to get some feedback from some of the more experienced forex traders to hear if this is a workable plan. The idea of this system is to have many winning trades with a small profit in each of them, rather than a few winning trades with a large profit in each of them.
Trading goals:
- break even
- have a win/loss ratio of greater than 50%.
Instrument:
- EUR/USD
Timeframe:
- 15M to determine trend, 1M for entry and exits. Charts will have the 5 period EMA and 10 period EMA plotted on them to assist in determining the trend direction.
Risk management:
- risk/reward ratio will be 1 to 1
Money management:
- trades will be micro sized (each trade will be 10000 units.)
Entry/Exit strategy:
-
look at the 15 minute chart to determine the trend. Then switch to the 1 minute chart and observe the price action. Assess the range that the instrument is trading in and add lines of support and resistance to the chart. Assess the volatility of the price (how rapidly is it changing?) Note the spread that the instrument is currently trading at.
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if the 15M trend is up, wait until the price is down near the support line. Place a long trade of 10000 units. (Vice Versa if the 15M trend is down.) Place a take profit point and stop loss point an equal distance from the trade entry to keep the risk/reward ratio at 1:1. Base the distance on the volatility of the market. (In a stable, non-volatile market, set the take profit and stop loss fairly close, EG. take profit at 3 pips higher, stop loss at 3 pips lower. In a more volatile market, increase the distance to 5, 10, or 20 pips, to give the market room to move before triggering the stop loss.) Make sure the take profit point is more than double the spread. (EG. if the spread is 3 pips, set the take profit at a minimum of 6 pips.)
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if the trade is successful and the take profit point is reached, repeat the process. Wait for a pullback when the price has come down towards the support line and place another long trade using the same criteria as above.
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if the trade was unsuccessful and the stop loss point was reached, go short for the next trade. Wait until the price is near the resistance level, and sell 10000 units. Use the same system for setting take profit and stop loss points
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continue repeating the process. Continue with long trades until the stop loss is hit on one of them. Then start trading short trades until the stop loss is hit, etc.
That’s all there is to it. As I said, I will be testing this in my demo account starting on Monday and will post the results.
Any comments? Do you see any big problems or areas that I could improve the system?
Thanks in advance.