http://www.netpicks.com/trading-plan-unfolds/

With so many Forex pairs to choose from, it helps to have a certain "look" in the market that you seek out for an opportunity. The same can be said for

other markets however Forex is extremely scaleable for traders of all

account sizes.

It makes scanning charts a quick exercise when you have a trade plan

that outlines setups and the conditions that need to be present.

Seriously, you need a trading plan and if you don't you have no doubt put a

road block up on your success.

There are so many things you can look for including a multitude of patterns

and indicator positions. I like to keep it simple by looking for markets currently taking a pause in the trend direction.

Pause is not a technical term but simply describes ranges or pullbacks

with a resolution.

It does not mean there is no buying/selling taking place.

Trend is, of course, time frame dependant and since I look for swing

trades, I focus (generally) on the daily/weekly charts when looking for structures and overview. Trades are

usually executed on lower time frame charts but with the bigger picture in

mind when placing stops and targets.

IMPORTANT: It's not just the pause but also what happened before the

pause.

Confused?

During one of my scans, I noted the EURUSD had what appeared to be a

selling climax on the daily chart. That move "stood out" and that's was

brought me to investigate further. It happened as the currency pair is in a

down trend on this chart.

I fully expected price to "pause" (a correction) and work off this move

before returning to the down trend. If there were no other trading

opportunities across other markets, I may have been tempted to trade the

corrective move.

Given the selling climax, I felt that the climax would be filled in a complex

correction so there was plenty of room for the trade to move.

To be honest, if the first pause, shown with the red arrow, actually pulled

back a little further and was cleaner, I may have four hour'd an entry.

The daily chart shows more of a range than a pullback and I was on alert if price was showing an indication that

downside break was close.

This chart is the four hour chart because the details, while can be inferred from the daily, are better

shown here.

FOUR HOUR CHART

The grey area is the range but as you can see, price is holding highs and the lows are getting higher. This buying pressure at higher levels points to an

upside break.

The yellow arrow shows a smaller range near the highs which is a sign that the break will be to the upside,

not short. 180 pips later, the breakout to the upside ends.

Now that the expected move has completed, I had to rethink shorting at this time due to structure that has now

printed on the chart.

1. The range prior to the breakout had me wondering if the buyers that came in at the range would hold prices if it returned. After four days of pause plus the break, it appears there is

strong interest in the buying department.

2. Were sellers absorbed at that level leaving little selling interest?

Given that information, shorts did not appear to be the play at this time. The plan was to sit aside on the first move when/if selling pressure took over the

market.

Price broke to the downside and held up right at the breakout level as you

can see on the daily chart. A few things came to mind:

1. Will this spook those that are long causing them to exit and drive price down?

2. If price breaks the bottom of the range and stops are hit, will I have missed a great entry?

3. Will those who missed the breakout trade the first pullback long? For details, let's head back to the four hour chart.

Price rallies but fails to hit the previous high showing a lack of buying pressure. Price heads into a range (seen better on the 1 hour chart) and an order to short is

entered first at 1.1415 in error and then re-entered at 1.1467.

All of this work is done rather quickly but it takes a trade plan and knowing what you are looking for to make it

work.

Breakdown 1. Looked for "something new" and saw the sell climax in the EU.

2. Expected a correction and would look to short the return to the trend.

3. Structure of price was not a clean correction. It was time to rethink the execution of a short trade taking new information into account

1. High probability of the move short being held up at the breakout level. 2. Expect late buyers to enter and bring price back up. 3. Look to short any sign of weakness.

The trade plan I follow outlines what I am looking for when scanning. Each individual trade has it's own trading plan because while setups may look

the same, they can act very differntly. Reassesing new developments for me is key to deciding whether to pull the

trigger.

Did the trade trigger?

The trade triggered 6 hours later and after some price drift, it broke and

didn't look back.

TRADE TRIGGERED

This type of trading relies on some discretion but is also pretty rules

based in terms of what to look for.

The truth is this type of trading evolved from system trading.

I bought my first real system in 2008

and no surprise, it was from Netpicks.

It taught me about rules and following a trading plan instead of knee jerking

into every large candle.

It had me only taking strict setups and taking risk seriously.

I believe it helped shape my thought

process about trading overall and probably most importantly, it taught

me about being consistent.

Without consistentely taking the right action, you will fail.

Take a look at

http://www.netpicks.com/trading-systems/

and learn more about what is offered.