Trading mindset is a trend following strategy and one of the objective is to find the market imbalance, that is supply and demand, this is a sub-goal of ‘your master trading plan’!
The Trading Mindset is to help me, as a new trader to think like a professional Forex trader. One of the requirement for using this tool is creating ‘a master trading plan’, from ground up. Trading plan includes ‘goals and motivations’, ‘personal strengths and weaknesses’, daily trading routine, ‘develop positive habits’, system (personal, don’t borrow or copy from anyone!), review and evaluation of your trading results, Business rules are the do’s and don’ts. Here is a quick outline to create your own master plan:
My Master Trading Plan with the 5 Ws and 1 H of Kaizen
Who? (The trader that is you)
- Who does it? ‘Me’
- Who is doing it? ‘EA Expert Adviser or me’
- Who should be doing it? ‘Me’
- Who else can do it? ‘No one’
When? (Timing , Set and forget type trades) I trade on Daily charts D1
- When to do it?
- When is it done?
- When is the other ti e should it be done?
What? (Markets, pairs, and currencies)
- What to do?
- What is done?
- What should be done?
- What else should be done?
- Why do it?
- Why do it?
- Why do it
- Why do it then?
- Why do it that way?
- Where to do trading? ‘My home/office desktop’
- Where should it be done?
How? (Planning and strategies)
- How to do it?
- How it is done?
- Is there any other way to do it?
What to trades?
Forex traders can focus their attention on 28 of the major pairs. Best Currencies to trade are 8 major (AUD, GBP, CAD, EUR, JPY, NZD and USD) and their 28 cross pairs.
Why theses are best Forex pairs to trade?
Forex market is about $5.3 Trillions per day it is biggest of any asset class! Trade volume in Forex is concentrated mainly in the US Dollar, Euro and Yen. USD makes upto 85% and EUR about 40% of Forex trading volume. Japanese yen JPY takes third place at 20%, followed by GBP, AUD, CHF, NZD and CAD.
This kind of good liquidity makes it easy for traders to sell and buy currencies. Also many if not all, major pairs can have long, well-defined trends that respond well to technical analysis and charting methods.
My dashboard logic explained in four steps!
F.O.R.E.X. (Fundamentals, Orient, React, Execute)
Step 1: Fundamentals
‘Forex market under the microscope’
- Can I trade today? calendar how many red reports today? Red reports mean an active day, big financial Institutions and banks will be interested.
- Big picture: ‘who is in control? Sellers or buyers? Weak and strong pairs? Where is the flow of money?
- Underlying conditions where is market going?
- How my day look like? If waiting for retracement (V-formation) or rally for entry?
Stooq.com -indexes (EUR, GBP, USD, JPY)
Stockcharts- (FTF and FX market summary)
Investing.com technical analysis
Finviz– relative strength, Forex performance
Oanda-heat-map & volatility
FXCM-Analysis, trading signals & current market action
Dailyfx -sentiments data from ‘IG Markets Client sentiments’
Ringgold– RSI and Currency Strength Signals (H,1D, 1W)
Tradingview– FX signal finder
Forex factory – economic reports, earning calendars, (months to watch! January, April, July and October)
Yahoo– build your customized watch-list
Google- price and historical data
Ino.com- Subscribe to their morning report and snap shot
Documents to watch fundamentals:
- Weekly major charts
- Snapshot ‘use: pair selection cheat sheet’
Step 2: Orient
What can you ‘see in current market action’ from ‘step number one -fundamentals’
Use: decision-making-work flow
Price action, charts, indicators and screeners.
Step 3: React
Your trade plan & decision making
Use: ‘decision making process’
Price action, bias, patterns, sentiment, volume (note: volume information is not reliable for FX)
Confluence on a chart: a uptrend ↑ or a down trend ↓;
- 18 & 50 EMAs on the Daily charts for trend and dynamic supply and demand levels identification
- Pullbacks: (a) establish strong main trend adx-10 period (b) short trend to entry trigger buy/sell (c) short trend snap back to main trend RSI 5 days, Bollinger-Bands lower end. (1.5, 10 days)
- Classic static: (horizontal line) support and resistance levels. Significant price action event areas. Strong directional movement or it can simply be a rejection of a level RBR, RBD, DBR, DBD 50% to 61.8% retrace levels
Step 4: Execute
Lot sizing and setup from the ‘decision-making process’ & ‘trading flow chart’
Use ‘trading logic & work flow’
Question: How many trades are considered enough trades?
Answer: Not more than 3 crosses, 3-day-trades and 1 weekly trade
- Currencies to trade: only trade 8 major and 28 cross pairs.
- Screening Norms for selecting fx pairs: Spread pips less than or equal to 2 or 5( with commission).
- ATR: The daily ATR must be ≥50 pips and weekly≥ 200.
- Positive Rollover Interest is highly desirable but not necessary for wealth trading.
First thing first, the charts!
Context: When you look up at the chart, ask following questions;
- Is the trend up, down or sideways, on a daily chart?
- Where are best quality supply and demand zones for market timing ?
- Why this trend is the market direction? (context at economic reports, levels and others).
I look at candles in groups and clusters, to find one of the four patterns. Trading with the main trend but ‘only’ after some kind of retracement or pullback. Start with Lower Time Frame (LTF) on D1 to find main trend.
Reversal Pattern (RP) Setups
- RBD (Rally – Base – Drop) for Sell Setup, in solid ↑uptrend, consider a sell trade because of a probable trend reversal detection for small duration.
- DBR (Drop – Base – Rally) : Drop -base-rally forms a demand zone for our Buy Setups. When a solid downtrend ↓ with DBR reversal pattern , plan a buy trade, upon price market reverses back up in predetermine demand zone, but slightly higher risk.
Continuation Pattern (CP) Setups
- DBD (Drop – Base – Drop) :The drop-base-drop is the opposite of rally-base-rally. Both form during trending movements. A DBD (drop-base-drop) always form a supply zone aka for Sell Setups.
- RBR (Rally – Base – Rally) for Buy Setup : The rally-base-rally is a type of demand zone which forms during an up-move.
Locating these patterns is the same on all time frames and charts.
Zone Mechanics (Stop & Value Lines)
There are 2 lines that form an Zone:
Stop Line – Farthest from current price Formed using price action pattern recognition.
Value Line – Closest to current price Formed using VWTPO and value area from volume profile
FRESH zone area has that price level untouched, where price has not traded into the zone yet, therefore buy and sell orders still unfilled.
TESTED zone price has traded back at least once into this zone.That means ‘possibly some life left may be there in this price level!, some buy and sell orders have been filled.
BROKEN zone’s price level has traded back once or several times to completely violate the zone. No life might be left here in broken price level! This id quite often area with exhausted pending buy or sell orders.
Analyzing the charts, to next level
Now analyze what part of the chart that price occurs in, candle patterns, formations or the candles, other factors influencing that actual candle pattern right now.
- At what part of the chart is it appearing in? You’re putting all those things together.
- Making an analysis of the D1 TF suitable Long trades and Short trades.
- After then scale down to 4H TF, and look for trades within the day.
Stronger and weaker pairs
Go through the D1 charts on the close of the candle at 5 PM EST (New York close D1). We are screening for stronger and weaker currencies. When putting the two of them together you have a;
- Strong currency that’s strong against all others or most pairs.
- Weak currency that’s weak against all others at that time.
Putting the two together and refer cross market correlation for ideal currencies that are likely to be moving up or currencies moving down. Be sure to find strength and weakness, trade decision making, odd enchantment process.
Adding probability to your trading: what are high probability trades?
- When you trade with the trend, that increase your odds and reduce your risk. Trend lets trade in both bull & bear markets.
- Place your s.e.t. up in good zones on your chart areas described above (zone mechanics)
- Enter your trades on pullback, breakouts and advanced entry called false breakout still with trend. Beware! breakouts can be false and novice traders get trapped while trading breakouts.
Trade in the same direction as Higher Time Frame (HTF) longer-term direction. This will eliminate false set-ups, set-ups that technically can look quite good, but against HTF trend.
- Establish the major trend on 1M (monthly, this is part of my trading plan, my HTF is 1M, what is yours?), then get major(extreme) supply and demand levels. Do not take a trade into these zones!, these are extreme boundaries for current price-action-run. These zones are called the curve.
- Go to weekly chart (1W) and find the main trend (ITF).
- Then go to Lower Time Frame, mine is daily(1D) to draw minor supply and demand zones with proximal and distal lines.You execute and manage your trade here.
Action and Execution:
- Decision making for trade action, as per following diagram.
Forex Dashboard App
I am developing an app based upon Google Sheets (spreadsheet) to help visualize and automate quick pair selection after qualitative analysis for Forex trading opportunities. I call it FX Dashboard, still in beta, I have been testing it for six months and results are encouraging!
- It is Automation, to eliminate human error, increase my edge.
- Dashboard analyse the Forex market all by itself.
- More than 75 variables like an economy’s strength , unemployment , strength and weakness, interest rates rates and trend.
Now Dashboard looks at about 75 pieces of information and present trading opportunities i.e. currency pairs.
Future update to Dashboard is to include the process of analysis to determine whether the current price of an economies currency is reflecting its current value, thus allows us to establish where the current price should tend towards.
These instructions will get you a copy of the spreadsheet up and running in your own Google account.
You need a Google account to make a copy of this spreadsheet and store it in your Google drive.
A Forex Brokers account is required (if you are learning get a paper demo account). Interactive Brokers, Trading Station, FXCM and OANDA highly recommended.
- Send me an email (Gmail id preferred), I will forward you link for the FX-Dashboard, that is a google-sheet App.
- Google sheet will ask for your authorization the first time you open the sheet. This is normal and nothing to be worried about. The sheet can not modify your Forex account in any way. If you are at all unsure, you can cancel the authorization at any time.
- When you click on it, following is google sheet acceptance walk thru for your use:
Know your Dashboard:
(1) Daily ‘price graph’ for 14 days to give you trend, graph formation and price action at a glance.
(2) EMAs for 200, 100, 50 and 20 period.
(3) Monthly, weekly and daily percentage performance to give big picture idea.
(4) ‘Currency Strength’ and ‘Trend Strength’ from +10 is strong uptrend to –10 strong downtrend and 1M, 1W and 1D trend direction detected. Right cell gives Apps Odds Enhancer algorithm to score currency pairs score 0 to 6. AT this time Dashboard App looks at Trend, Major currency pair rank, trend strength and confluence (on EMAs, technical analysis and studies). Future update will include Macro, micro, economic data.
(5) Daily High, Low and daily percentage price change for the pair. The daily percentage change cell also show red or green color to give trend direction on daily chart.
(6) Cross currency pair’s name and the current price (15 minutes delay, via google server)
(7) Current Trend detection via 20 period EMA. If square is green then, EMA is below price, however on red square 20 period ema , it is a down trend with price bars lower than ema line.
(8) The ‘Major Currency’ and its daily /hourly rank (from one to seven, USD is always 0; in the middle!) out of 8 currencies, If number is 1 or 2 with currency in green, this means two of top performing UP Trend currency. Number to 6 and 7 in red font represent most downtrend currencies. This means if you are like to trade on shorter time frames 1H or below, Choose two majors that are strengthening(i.e rank 1 and 2), and two weakest majors (with number 6 and 7). For currency strength snapshot go to Finviz, or RINGFINZ tab of the Fx Dashboard.
(9) Today’s economic reports the number of reports for a major to be released today. If ‘REPORT label is in red background, then High Impact Report (HIN) and Medium Impact Reports(MIN) are impending today. Check th ‘Report’ cell Notes to have a look at this weeks Economic reports.Please note that the signals are optimized for monthly, Higher Time Frames
- Trading Alerts – Only execute intra-day trades on 1D daily time frames.
- Long Term Trading signals – Signals last up to a few days.
Future Signals updates for Forex Dashboard:
- Pair – The relevant currency pair
- Action – Trading signal, telling you to Buy (in green), Sell (in red) or do nothing by staying away from the trade is also an option for the pair.
- Stop Loss – An automatic exit point to protect your investment. This is the suggested price at which to exit the trade in case the market goes against you. Make sure you apply a Stop Loss when opening the position in your trading account.
- Take Profit – This is the suggested target price at which to exit the trade. Once the rate hits ‘Take Profit’,
Status – The current status of the signal. Let’s review the possible statuses:
- Active: this status means it is an open signal. As long as a signal is active, traders are advised to follow the alert and enter the market!
- Closed: meaning the signal is no longer active and has been closed by our system.
- Get Ready: be prepared. There is a good chance that the system is about to open a new position. The ‘Get Ready’ signal might become ‘Active’ or disappear
- Comments – Live updates on changes in Stop Loss, Take Profit or Status.
Disclaimer: FX Dashboard comes with no warranty whatsoever. If you use it as Forex pair selection trades, or elsewhere, you do so completely at your own risk.