The Dynamic Trading Plan
What we need to know before we construct our Trading Plan is that while we may use the same set-ups and triggers, and even conduct the same overview beforehand, the specific signals we take will still depend on the type of market we are in: trending or counter-trending, and for trending in particular what stage of maturity the individual trend in a market is displaying: congruent or diverging? Regardless of your set-ups and triggers you’re not going to be successful if you’re taking trend signals in a counter-trending market or taking counter-trend signals in a trending market. Bottom line: your Trading Plan has to be as dynamic as the markets.
While your plan has to account for different variables, thanks to the analysts and traders who have gone before us these variables are measurable. And as complicated as all this sounds, it is not, as long as you learn it one layer at a time, and understand the importance of starting with an overview that gives you trend on the appropriate time frames, and momentum.
And it is in conducting that overview where you will determine the stance of the individual markets which will determine the tools and triggers you will use. The market’s behavior will determine the appropriate variable to use in your Trading Plan. And your Trading Plan will dictate your actions. The key to remember is that it’s a dynamic process which always starts with price and can only advance by a change in the behavior of price.
Jay Norris
www.trading-u.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.