A Simple Plan To Dramatically Improve Your Trading
Let
me ask you a question, and please answer yourself honestly: Do you have
a plan of action for your daily trading routine or do you just open
your charts and randomly start trying to find trades with no logical
guidance behind your actions?Plans give you a “roadmap” of how to go about getting what you want in life. Not having a plan for something makes it harder, it doesn’t matter what it is. Even if you are planning a family vacation that should be full of enjoyment and relaxation, if you don’t have at least a basic guide as to what you will do each day, it’s probably going to end up being confusing, semi-chaotic and highlighted by fights and disagreements rather than fun and laughter. Planning makes everything simpler and easier to accomplish, and a simple plan can put even a complex or lofty goal within reach.
Today, I am going to lay out a simple plan that you can use to improve your trading. The only “catch” with this is whether or not you have the discipline to stick to it. Most people struggle with discipline in the markets, but simplifying your daily trading routine can make it easier to stay on track and remain disciplined. So, let’s discuss the various components of this simple plan that I’ve designed for you and then next week you can get started following it and see if your trading improves.
Note: The steps below are meant as a basic trading guide or plan to help struggling or beginning traders. If you are serious about using this plan, then you should follow it for at least two or three months and then tweak it as you see fit after that.
Step 1: Trade only major markets
The first step to this simple daily trading guide is to be sure you’re only analyzing some of the major markets. I like to stick to the major forex currency pairs as well as spot Gold, Crude Oil and Dow. Here’s the symbols for the markets that I follow the most frequently and the ones you should follow for this simple trading plan:EURUSD, GBPUSD, AUDUSD, NZDUSD, USDCAD, USDJPY, EURJPY, GBPJPY, AUDJPY, XAUUSD, WTI, DJ30
That’s 12 markets, more than enough to focus on. If you’re in the USA and you can’t trade spot Gold, Crude or Dow then just focus on the currency pairs I’ve listed.
There really is no need to analyze 20 or 30 markets like many traders do. Besides, if something big happens that really moves the markets, it’s probably going to show up as a price action signal on one of the 12 markets I’ve listed above anyways. If you really want to simplify your daily trading routine, you should scale-back the markets you analyze so that you are just focused on a handful of major markets. The first step in this simple plan is to figure out the markets you will trade and make sure you’re not looking at more than 10 or 12 per day, the list that I use above is suitable for any currency trader to use.
Step 2: Clean up your charts and only trade daily charts
Next, it’s time to get your charts setup. Open the daily charts of the markets I’ve discussed above, or whichever 10 or 12 you want to follow. If you don’t know how to get your charts looking like mine, then read this metatrader 4 tutorial that I wrote, it will help you get all setup.The second requirement for this simple trading plan is to only look at and trade the daily chart time frames, if you start looking at the 4 hour and 1 hour charts or below, you will have broken your discipline, and I can only vouch that this plan will work for you if you follow it to the T.
Step 3: Pick one setup to trade
This step is critical; you will only be trading one price action signal for this trading routine. Last week, I wrote an article on how to master your trading strategy, I suggest you go read that before implementing the plan I’m laying out in this article. Eventually, you can try learning different entry signals, but for the purpose of this simple trading plan I am designing for you this week, you should only trade one signal. If you start to see that you’ve stopped losing money each month and that your account is growing slowly but surely after using this plan for two or three months, then you can start implementing different entry signals. But, for now, I need you to understand that you have to narrow your focus, remove variables and reduce clutter from your mind and charts to really “turn the corner” in your trading, and the best way to start this process is learning to become a master of one setup at a time.Step 4: Follow this money management plan
For purposes of simplicity and to show you the power of risk reward,
all the trades that you take while following this plan will be set at a
1:2 risk reward. That means, your profit targets will be twice the
dollar amount as your risk.The way to place your stop loss properly is to use the surrounding market structure to figure out the most logical place to put it that gives the trade the best chance at working out but also is not too far away. What this basically means is that you should not place your stop an arbitrary level because you want to trade a certain position size…this is greed, and it will end up working against you in the end. You should have predetermined your 1R risk per trade (this is the dollar amount you risk per trade), then when you find a setup you want to trade you figure out the safest and most logical place to put the stop loss…then you adjust your position size so that you are only risking your predetermined dollar risk amount.
You will place your profit targets with the aim of getting a 2R reward on every trade; that just means two times your risk. However, in placing targets you do also need to consider the surrounding market structure; if a logical 2R reward is not realistically possible because a large key level is in the way, then you might have to reconsider taking the trade.
After you figure out the most logical stop placement you will then adjust your position size down or up to meet your predetermined dollar risk amount. If you need more help on this topic of position sizing, check out this article on risk reward and position sizing.
Step 5: Track your progress in a trading journal
The next part of this simple plan is to make sure you’re recording everything in your trading journal. If you do not have one you can get a trading journal here. Keeping a journal of all your trades is probably something that many traders forget about or that falls to the wayside after a few weeks…but you can’t let it. You NEED the track record created from keeping a journal to make trading feel more like a business and to bring more of a process into your trading routine. The actual process of entering your trades and journaling them will help to keep you disciplined because it reflects back to you your trading results. If your trading results show that you’ve made emotional trading errors like risking more than you knew you should per trade or entering stupid trades that you knew you shouldn’t have…you will see these things in your journal and hopefully you’ll stop doing them.It’s easy to be lazy and gamble your money in the markets, but when you are forcing yourself to keep a journal of all your trades you will be a lot more aware and conscious of your behavior in the market. If your behavior is that of a gambler, you will then clearly be able to see that YOU are the problem with your trading and that you need to adopt the proper trading mindset to succeed. If your trading journal begins to show a pattern of consistency in following your risk management model and your trading strategy…it will be something you can proud of…few traders have a track record that they are confident in showing to other people or potential investors. You have to use the trading journal as a tool to reinforce positive trading habits and help eradicate negative ones, and you do this by forcing yourself to manually record your trades, think about them and analyze them.
Step 6: Follow the plan
Now, clearly the plan I’ve laid out today will not work if you don’t follow it. You need to be sure that if you commit to this plan you actually follow it. Give it at least two months, and then evaluate where you’re at. Maybe you’ve stopped losing money and are breaking even now, maybe you’ve made a nice profit each month, either way it’s an improvement over losing money each month, and that is the point of the simple plan I’ve laid out here today for you; to get you off the track of hemorrhaging money from your trading account and onto the track of slowly but surely becoming a profitable trader.Step 7: Challenge yourself
Perhaps
the best way to think about the guidelines I’ve laid out for you in
today’s article, is that they are a challenge to yourself. Many people
have trouble completing even the seemingly simplest tasks; reading a
book from cover to cover in two weeks, getting to work on time or early
each day, exercising three times a week consistently…whatever the task,
it can be very hard for many people to stay focused on it long enough to
see its benefits pay off. In trading, this trouble with focus and
discipline is an even bigger problem than in most other things we do;
because in trading your hard-earned money is on the line each day.To end today’s lesson, I want you to do something if you’re really serious about following this simple plan that I’ve laid out here today. I want you to either print out this lesson and sign the bottom of it as a pledge that you will follow it, or write yourself a little “commitment” pledge and print it out and sign it. Hang this paper on your wall next to your trading desk or put it somewhere where you will see it each day before you trade. The first step to becoming a profitable trader is seeing if you have the discipline and patience to stick to a simple plan like this for two months. After two months, come back and leave me another comment on this article or drop me an email and tell me about your trading results. If you want to learn more about simple trading strategies that can help you dramatically improve your trading results, checkout my Price Action Trading Course here.
About Nial Fuller
Nial Fuller is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 15,000+ students since 2008. Checkout Nial's Professional Forex Course here.Related
- Nial Fuller’s Price Action Forex Trading Course. Learn Advanced Price Action Strategies & High Probability Trade Entry Signals That Work
See you later with results!!!!!!!!!
Best Regards.
see you all in two months.
thanks Nail, may God bless you and your family.
very nice lesson, it looks as if this was written for me.
thnks Nial
Thank you for this great article. Challenge accepted. Good news to follow in two months time.
Regards
Colin
carlos
Thank you, Nial….
Thank you!!
thank you Nial.
Keep going…
Cheers :)
Thanks for the prodding, Nial.
Columba
I open the charts with no plan so this is for me. I let the journal fall away the last couple of weeks too. I look forward to implementing this plan. Thanks.
Thank You Nial.
Thanks so much for your trading lessons. I’ve really been following your lessons from the ‘side line’ ( not a member yet) for about a year now and I’m proud to say there is a big improvement. I’m still demo trading for more than a year now and this month, Feb. 2013, I’ve made 9 trades so far with 6 rewards and 3 losses. I only trade from the daily chart and I must admit it was really hard to part ways with the intra-day charts. I’ve become more relaxed, learnt to be disciplined and for all trading without indicators! Nial, thanks for every lesson, I think now I can try going live.
Judith.
1 Hour and 4 Hour Charts now Daily.
Trading plan written out in simple English.
Journal work sheets printed out and ready.
My birthday in 2 months time on 20th April. Determined to
see this through. Promised to buy myself a
birthday present to celebrate my commitment to this plan.
Thanks Nial I really needed this wake up call.
Thanks for such a simple plan to follow.
I believe I am on the right track as I already follow the majors in the list. No to de clutter the screens and only follow the daily chart, get rid of the rest. Set up New profile in mt4 on Sunday and of we go on Monday. Let the challenge begin.
Thanks again Nial
Gary (clueso)
Your concepts are not only useful for trading (brilliant), but also so valuable for whole life. thank you very much.
/s/ George B
SIMPlCITY and DISCIPLINE
We are ALL so lucky to know you
Thank you so much
your lessons weekly is very helpfull and motivational!!
you are the guy!!!
believe it or not i exactly follow this plan and same currencies you have mentioned, i dont even look at 4 hours. And seriously it has improved my trading and i have been profitable ever since.
All your Lessons have been a great treasure for me. Thank you.
Thanks You so much Nial
Can you guess how many trades will be triggered weekly and monthly if one uses PIN BAR entry method?
There are umpteen trading strategies that really work (inside bars, retracements, pullbacks, pins, engulfing candles etc etc) and for sure why they don’t is the actual trader themselves. That’s where I was a while ago – getting nowhere until I took stock of what I was doing, then started applying your approach to discipline. I trade different setups, but I realised that it’s down to me, not the magic forex fairy, to really make things happen.
This is all I want a guide to follow thanks great topic.
This is great. I just wanted to comment on step 2 of the plan. It’s true what you saying here and I have proved it myself. When I started following your tip, this was the first tip I implemented on my trading strategy, I have been trading EURUSD on a clean daily chart with only my supports and resistance. This has increased my winnings.
Eternally grateful to you
for all your help
God Bless
This is antidote to clear the toxin in the trade.
cheers