Developing your Trading Process

Developing your Trading Process

Introduction

In this final section, we are going to be putting everything you have learned together into an actionable trading plan that you can use every day in the markets. The basic principle that you need to always keep in mind is not that you should be following this rigidly step by step but rather that you should be looking to apply these principles over and over again.

The main themes of this training are as follows:

• You need a good understanding of the overall markets and not just how to trade forex specifically. The different markets that we have talked about are interrelated and are terms that you will come across almost every day in your research.
• Fundamental analysis should be the foundation of every single trade you take. The key to fundamentals is understanding the reasons behind each price move in the markets.
• Risk management should be incorporated into every single element of your trading business so that you have multiple defenses protecting you from losses at all times.
• Technical analysis should only be used as a simple method of visualizing a trade to give it structure. All technical concepts are more or less the same when it comes to their effectiveness.
• Trading psychology should be your number one focus once you have the basic 4 elements of professional FX trading understood and the skillsets learned. Working on your inner game is the key to consistent profitability. The ultimate goal for you is to be trading in the zone at all times.

Everything in this course is more than enough knowledge for you to create a trading plan that you can use to start developing and practicing your skills further. Remember, just like buying the best golf clubs will not make you good at golf, consistently hunting for more and more knowledge will not make you a better trader. You need knowledge first, practice and skill building second, followed by working on your inner game from that point on.

With all this in mind it’s time to create the trading plan so that you can move on from the knowledge building stage and on to the skill building stage. There are several things that we will be focussing on in this section but the main goal will be to build up a routine that you can follow every day no matter what the market conditions may be.

Your routine should be comprised of 4 distinct elements:

1. Knowledge phase
2. Analysis phase
3. Execution phase
4. Review phase

To make this clear and simple we will go through each one of these phases and give you the tools you will need for each one. At the end of this section we will look at the routine of a successful professional trader along with a selection of trading strategies that we use that you can also use for yourself depending on your trading style and preferences.

Finally, we will provide some print outs that you can have physically on your desk each day to make sure that you are constantly following your routine and improving your overall performance rather than just going around in circles. These will help you stay on track and also provide a very useful log that you can look back over as your trading career progresses. This will also help when you are working on your psychology and trying to improve your weaknesses as a trader.

Before we get into these 4 phases what we are going to do now is get you up to speed on everything you need in order to be able to actually sit at your desk and plan your trades.

Trading Tools

The first thing that we need to look at is an overview of the tools that we as professional traders use and that you should consider using from this point on. These tools include research articles, news feeds, charting software, and trading platforms.

Research Articles

A research article is anything that gives you the overall flavor of anything going on in the market. This should be either generally or with a particular currency or currency pair. The purpose of an article is to help you tune into what has been happening. This will in turn help you to start to formulate an idea about what might happen in the upcoming session.

These articles do not necessarily give you specific trade ideas, although sometimes they can, but they do help you be in step with the overall market. Researching the markets by reading these articles is the first phase in your routine that should be done every day before you look at anything else, even before looking at the charts. This allows for a top down approach that will help you zoom in on a particular pair. This gives you a much higher probability of success because the chances of you missing something important are vastly reduced.

Here is a reminder of your free reading list and these are perfect sources to conduct your research from.

• Central Bank News: http://www.centralbanknews.info/
• Bloomberg news: http://www.bloomberg.com/topics/currency
• FX Street: http://www.fxstreet.com/
• Forex Live: http://www.forexlive.com/
• EFX News: https://www.efxnews.com/series/central_banks_insider

You are looking for any article from the major currencies that you trade and the central banks that control them. We will go through the process of reading an article in a moment but this gives you a general idea.

Other than these sites there are other sources of information that can provide valuable research and overviews. For example, many traders subscribe to various analysists and receive text or email alerts when they have new information about the markets. This can be achieved by following these types of sources on social media with Twitter being one of the most popular platforms to get market rumors and research extremely quickly.

Research can also be via paid sources. There are various research terminals available such as MNI, Reuters, and Bloomberg. These premium research sources are not vital and only provide a minor advantage over other options. The internet naturally allows almost any information to be found quickly now and can be viewed as the ultimate research terminal itself.

Wherever you source your research from there are 4 key points that you are looking for in order to extract the most important information from each article that you read:

1. The currency pair that has moved
2. The direction that the pair has been moving
3. The reasons why that move has occurred
4. What are the analysts are saying and what their expectations are for that move into the future and their reasons for their opinions

With this in mind let’s walk through a research article together and analyze it to see what information we can get from it and how we can use that to build a plan and find a trade.

From this article you can see that from the title alone we get the currency of focus which is the AUD and the direction being down because we know that interest rate cuts will drive price down over the long run. The source of this information is UBS which is a very large and respected bank so we know that a lot of people will be reading this information.

If we look into the article we can see the analyst trade call for AUDUSD to go as low as USD 0.68 and at the time of this writing the AUDUSD was much higher than 0.68. The reasons for this move lower is potential interest rates being cut further. The RBA has already made several interest rate cuts in the past 18 months as well so we know that this has the potential to make this information more relevant.

From the title alone we have a good reason to open the article and dig a little bit deeper to see if there is something that we can use from this article. In there we find many supporting pieces of information to validate the view that further interest rate cuts are to come. We now have a currency pair to watch for any possible longer term short trade setups.

Keep in mind that you don’t go straight into the market doing whatever a particular article tells you to do. It is simply something that helps to get you prepared for the upcoming session. Different articles will have various time lines from something that could impact in the current session to a more macro perspective for the next year. We want to be focussing on the articles that give us an edge today.

If you just look at a price chart of the currency pair being mentioned you don’t really know what is going on with that pair or why it’s moving the way it is. After reading an article or two you start to get a much deeper understanding of why things are moving the way they are. If you get several articles all saying roughly the same things then you know that it is potentially a much stronger theory here. If you only see one article and the theory is not mentioned anywhere else then the theory has lower conviction.

After reading several articles you will know exactly which pairs you should be focussing on and you will have lots of trade ideas for the upcoming session. The more that you practice this scanning of articles the faster and more efficient you will get at the process.

As you can see the process for deconstructing any research article is pretty simple and straight forward. Once you extract these 4 pieces of information you can then start to build a big picture and put all the different sources together to really see what the market is focussed on and which way certain currencies are most likely to be moving over the coming days and weeks. Think of this process as building the foundation for your trading bias for any potential positions that you might look to take.

News Feeds

Once you have conducted your research the next step is to check the news feeds in order to catch up on the latest sentiment moving the markets over the most recent session. There are many varieties of premium news feeds with costs from a few hundred to several thousand dollars per month. However, there is very little difference in this age of information.

All professional traders in every single firm, fund, or bank on the planet have access to real time news feeds. For anyone thinking that news feeds may not be important then you might want to think again. If you are going to succeed in this program then accessing a real time news feed has to be one of your main priorities, not just as you learn, but for your entire trading career.

The news feed should give you everything that is relevant and most importantly everything that is currently driving the market sentiment at that precise moment. The goal of the feed is to find out quickly what has been driving prices during the most recent session. It should also alert you of anything that happens unexpectedly in the middle of the current session while you are at your desk trading.

The evolution of the audio squawk is an interesting story that began not that long ago across major institutional firms. There are hundreds of different news sources all with their own unique selling features and price tags. It’s not very practical for a trading firm to purchase every one of these trading tools for each trading desk because trying to follow all these news flows would turn into a full time job in itself.

At the same time, traders need to know exactly what is going on and have access to the latest research and developments all while being free to execute their trades without distraction. The solution to this was an audio squawk desk. These desks would be set up in-house in an area away from the trading floor. The audio squawk desk would sit a team of analysts whose entire role was to monitor all available news flows on dozens of monitors all day long. These rooms would be connected to the main trading floor via a sound system so that when something major happened it could be squawked to all the traders at the same time. This meant that the traders could focus on trading without missing out on anything important.

Over time these houses developed and grew and started providing text headlines so that everything that was squawked could also be written and displayed on the screen so that when traders took a break or went to lunch they could see what has happened while they were away from the desk. After a while these houses were a normal occurrence at large trading firms and a niche was born.

It became obvious that demand for this type of service was very strong from smaller trading companies that didn’t have the capital means to have house analyst desk and while at the same time have individual traders managing money. This led to squawk companies setting up independently and offering their services to multiple trading firms rather than just being dedicated to a single entity. This brought the cost of this information down and made it much more widely available to the market as a whole. This allowed firms to cut down the size of their in-house team to just a few analysts saving costs while still having all of the benefits.

The feed that we use is one of the best in the industry and has been for some time now. This is the Ransquawk news feed.

What happens first is you hear the analyst say the headline. They will only squawk off headlines that are important. This is then followed by a text line that may provide some extra bits of analysis. These headlines are then updated as any new information becomes available.

The picture above is simply a snap shot of the Ransquawk news feed. It was taken during a weekend when the markets were shut down and only shows late Friday news so there is not a lot of information flowing through it.

There are several other news feeds that are worth taking a trial to see which one you prefer. Here are a couple to get you started:

http://newsquawk.com/ http://www.livesquawk.com/

As you can see the news feed is one of the most powerful tools that you will ever use that will help you find clear high probability trading opportunities from it week in and week out while protecting yourself from any market impacting events that occur out of the blue.

Economic Calendars

The next tool that we are going to look at is one of the first things that a trader should look at a week in advance and at the beginning of each trading day. Neglecting this can have serious consequences to your overall profitability.

The economic calendar provides several pieces of key information that you need to be aware of as you head into the next trading session.

First of all, you need to know what events are taking place, whether or not these events are expected to make a big impact on the markets, and then you need to find out the details behind these expectations. One of the worse mistakes new traders make is to not fully prepare for a trading day and have a perfectly good trading day ruined by some news event that was known well ahead of time and quite predictable.

Economic calendars are freely available all over the internet as well as some premium paid sources as well. What we will do now is walk through an economic calendar and highlight some of the more important elements that you should be focusing on as part of your daily routine.

http://www.forexfactory.com/calendar.php

The above is a snapshot of the Forex Factory Economic Calendar which is a free and widely used website. They give a rating system with red being the most high impact. You can click on any of the risk events to get a snap shot of what the potential market reaction might be given a positive or negative deviation to the expected number.

This is not the only economic calendar available. If you have access to a premium news feed this will typically come with one as well. It’s not that one is necessarily better than the other and certain calendars will miss events that others might not from time to time. The key is knowing when the most important high impact events are coming out and preparing yourself in the ways that we have taught you in this course.

One of the main things we are looking for with an economic release is deviations between the previous and the expectations. If the expectations are expected to be better or worse than the numbers came out previously then that could potentially provide us a tradeable opportunity. If we get a deviation in line with the fundamentals then we can look to trade in line with that. If we get a deviation not in line with the fundamentals then we should be patient and look for an opportunity to get in on the pullback. However if the deviation is really far out of line then we might look to trade in line with this sentiment. The point is that we have to assess the deviation in the moment to understand the situation at hand.

If the numbers are expected to come out the same then there isn’t much of an opportunity to trade into the event. Rather we would wait to see if the numbers come out with a deviation to see if there is a trade opportunity out of the event.

Before the event we assess the previous versus the expected while getting an idea of the high and low expectations. After the event we look to assess what the actual numbers were that came out and assess the deviation, if there was any, and how that will affect the market moving forward into the session. Keep in mind that the live squawk will speak the economic numbers the instant they are released.

Looking at the daily economic calendar should be a firm part of your daily routine before the markets open each day. If you are holding positions over several days then you should also be aware of what is coming up over the coming week or two so that you are fully prepared. Remember, the market frequently trades into these risk events so it’s vital that if something is coming up that you understand that you are in a position that could have serious implications for you and your trade.

We will look at how you can trade risk events later but for now just know that you need to be prepared for them and that using the economic calendar is a simple way of doing this.

Charting Software

Once you have completed your fundamental and sentiment analysis using the tools that we have just looked at you should have a very clear idea of which currencies you want to buy or sell.

Remember, the general rule of currency trading is to buy currencies with strong sentiment and sell currencies with weak sentiment. The more extreme the divergence is the easier your trade will be. Buying a strong currency against a neutral currency is a decent trade but the best ones are when we have two good reasons to trade currencies in opposite directions from one another.

Once you have reached this point in your analysis you need to decide whether you should just jump straight into the market or wait for a specific entry point. These types of decisions generally depend on the type of trade that you intend on taking.

We will be looking at all the various trading opportunities that you will come across and how you should approach each one in a later section but for now we will deal with the technical aspect of using your charting software to identify opportunities.

Your charts are simply a combination of certain technical tools that come together to give you a clear visualization of price and what it has done recently. We then use this information to understand where the market may potentially be inclined to trade from during the upcoming session.

There are hundreds of different charting packages available and as you develop your business you will gravitate to ones that fit you better. The platform that we use is the MT4 platform created by a company called MetaQuotes. The reason we use this platform is because it has all the analytical tools we need, it’s well established being one of the most widely used platforms in the world, and fairly easy for new traders to navigate. The MT4 platform is offered by almost all FX brokers so it’s very easy for you to change brokers if that is something that you need to do.

We won’t bore you with a section on how to use MT4 because your broker will have basic tutorials that will get you up to speed just fine. You can go to YouTube and literally find thousands of helpful and informative videos on MT4 that will cover pretty much any topic you can think of. Learning to use MT4 is a perfect topic for self-study because of the large amount of high quality information that is available for free on the internet.

For information on every detail of MT4 you can go to the creator of the platforms website:

https://book.mql4.com/

Getting to grips with the charting software and technical analysis in general is simply a matter of practice over time. But try not to get too caught up in understanding all the fine intricacies of MT4 because all you need is to be proficient at is reacting to the market quickly with your trades should an immediate need arise.

MT4 software also has a trading platform integrated. This allows you to see your positions without leaving your charts which simplifies the whole process of trading and is another reason we prefer to use the MT4 platform. You can even trade directly from the charts if you choose.

The main reason for pointing this out here is so you can understand the flow of trading. The trading platform is what comes last in your flow.

Here is how the flow of trading works:

• First, we do our research.
• Then check the news feeds.
• Next, we look at the economic calendar.
• Conduct technical analysis on the charts.
• Finally, we use the trading platform to actually place a trade.

The flow is consistent and never changes!

Trading Routine

In this section we are going to break your daily trading down into the 4 phases we looked at earlier. Each of these phases incorporates the tools and the flow that we have just covered here.

The 4 phases that every trader should go through are:

1. Knowledge phase
2. Analysis phase
3. Execution phase
4. Review phase

If you do not complete all 4 phases as a regular part of your trading then you will struggle to achieve any kind of consistent profitability. As with all concepts in this training you need to take this one as seriously as the rest.

Knowledge Phase

This is the phase that you have basically been in through the entirety of this FX training course. Knowledge is the first step in acquiring any skill and the key is making sure that you get the correct knowledge while you are in the delicate developmental stages of your career.

You are receiving your knowledge from what we think is the best possible source here. However, many people attempt to learn alone by searching the internet for courses or systems that promise instant wealth with little effort. Following that sort of path will never lead to success and is literally like trying to learn how to play golf with a baseball bat. No matter how much you practice you will never be any good at it.

Even though it’s only important initially it’s absolutely vital that you stick to the information and material that we have covered in this training course. Even when doing your own research, which we encourage, be careful not to veer off into things that sound too good to be true or seem too simplistic. Trading is about understanding and being turned into what is going on in the markets and you cannot do that without effort and work.

Most traders that have been around the game for any length of time enjoy the process but it’s still a lot of effort and requires constant dedication. If you are not enjoying the process of trading or find yourself constantly craving some easier way of doing it then it might be that trading is not for you and you should be honest with yourself to save anymore wasted time or money. People with that sort of attitude aren’t going to like whatever jobs they have either so you might as well bite the bullet, hunker down, and learn this program inside and out because it will give you your best chance of success that you will find anywhere.

If you can’t become a successful trader over the long run with all the information and resources that we provide then you likely won’t find success with trading anywhere else. Your success does not depend on us spoon feeding you. We give you all the information that you need to make smart trading decisions but ultimately we can’t force you to come to your desk on time every day and follow what we have taught you. That is all up to you! There is no room for laziness in trading and you either do the work or you don’t.

Having the correct knowledge and then practicing this knowledge specifically will indeed make you a better trader. Becoming a better trader may mean that at first that you simply lose less, and then you lose a little less next, until finally you are at a point where you are roughly breaking even. This is normal trading progress so don’t be disheartened if you’re not profitable after a few weeks. To achieve consistent profitability over time requires dedicated practice.

The goal of your trading in these early stages is to simply increase your knowledge, internalize this knowledge, and define how it should all be incorporated into your process. All you need after that is practice practice practice!

Following along with the information and resources you are provided here will shorten your learning curve dramatically but your input and effort will be the most important element to your success. If you are lazy then no one can help you. If you think about it laziness is a habit and you can change your habits by simply consciously forcing yourself to do the work until the work becomes a normal and easy part of your day.

What knowledge do you need?

You need to first understand the financial markets as a whole, why speculative trading exists, and why traders trade different assets and markets. This was all covered well in the initial sections of this course and is the base for this training. There is no harm in going back over those sections from time to time as it will only further help to solidify your knowledge. A good tactic is to independently research certain topics and concepts that you come across in your day to day analysis that maybe you don’t understand fully. Doing this will fill in your knowledge over time but will ensure that you are only learning things that are actually relevant and worthwhile.

This principle applies to all of the trading terminology that you will come across on a daily basis. If you hear a word or something that you don’t recognize take the time out to use the resources and the reading lists that we have provided and the internet and find out what they mean so that you are never without an understanding again. Become a go getter rather than someone who needs to constantly have their hand held their entire career. The point of this program is to make you able to operate independently if needed.

Knowledge can be an ongoing thing but only in a focussed way such as what we are doing in this training. Once you understand the markets you should then understand how to approach FX specifically and how to use all of the tools we have looked at. You then need to know how to correctly apply each of the 4 elements of professional FX trading into your own trade plan. Knowledge is a starting point but it’s very important to keep these points in mind also.

As you complete this program you will move to the next level and this is where the next 3 phases really come into play because at that point you will actively be trying to apply your knowledge in the real markets on your demo account in order to develop your skills and perfect your process.

Each trade you take should be viewed as a lesson and you should attempt to learn something from all your trades if possible.

Analysis Phase

Before placing your trade the first thing you need to do is conduct your analysis and this means everything from fundamental, sentiment, risk, and finally technical analysis. It means that you have checked everything possible before risking your money and eventually the accounts of your clients to the markets.

In general, the better your analysis the better your results will be. If you get lazy with your analysis, no matter how good your results were up to that point, your trading performance will almost certainly suffer.

With so much to analyze we will break this analysis down into steps that you can follow.

The first step before the start of each day about an hour before the session kicks off should be refreshing your big picture view by researching the markets using the tools and resources that we have already looked at. You are basically reminding yourself what the big picture is for the major currencies.

Once you have done the above you need to identify the prevailing sentiment to figure out which currencies are moving and the reasons for those moves. The rule that you must always keep in mind is to find currencies with the opposite sentiment so that you can trade them as a pair and increase the chances of the trade working out successfully.

In the fundamental analysis section we gave quite a lot of focus to all the various elements that can move the Forex markets. It may be worth going back over all of these until you can quickly identify the prevailing sentiment and approach it based on how we expect the markets to move.

The sentiment and the reasons for the sentiment will be the basis for how you approach your technical analysis and how you try and position yourself. This makes it vital to really ensure that you are fully tuned into what is happening in the markets.

When conducting your fundamental analysis for day trading you should always be asking yourself the same 7 questions throughout the trading session.

These 7 questions are:

1. What was the main sentiment driving the markets yesterday or which currencies had the strongest sentiment driving them?
2. What happened over night or in the most recent session prior to the one that you are trading?
3. What did the market do at the open of the current session?
4. What data is coming out and what are the expectations for that data.
5. What has any recent data done compared to how it was expected?
6. Why enter this trade now, why not later, why not tomorrow?
7. What is actually going to drive price to your target if you get in right now, what specific reason does the market have for trading it right now?

By going through and answering these 7 questions you will give yourself a good overview of what is going on and will help you take yourself away from getting too wrapped up in taking a trade just because you saw one. If the trade still seems good then you can have more confidence in entering it and can then go to your charts to try and pinpoint your entries and exits.

When it comes to actually placing a trade you need to be clear on what your plan is for the trading session. Do you have a specific currency that you are targeting? Is there a specific setup that you are waiting for to get in? You should also be aware of the main risks of the trade. This includes checking the calendar for upcoming events. Just before you push the button you should always do a final check for anything that may have happened to cause your trade to not work out the way you expect it to.

This process will help you stay closely tuned in to everything that is going on and it will also help you from overreacting to certain events that may seem big in the moment but that do not actually change the overall view of the currency.

For example, there may be an economic release that comes out much worse than expected, causing the market to really sell off the currency, but because you are fully tuned into the big picture you are aware that most data over recent months has been very good and that the central bank is not particularly focussed on the data that has just come out badly. This means that instead of getting sucked into the panic you are now looking for an opportunity to start buying the currency back because nothing has changed except it is now a much more attractive price.

One bad data point in a series of strong releases doesn’t change the big picture. This is just an example but it illustrates why you should be analyzing everything about the currency including the big picture everyday so that your mind is fresh and you can make accurate decisions in the moment.

It is also worth noting that your technical analysis is a part of this phase. We have just looked at how you need to be checking the fundamentals and all of the possible risks that you can be exposed to but after all of this you will need to check your chart and identify whether or not the price action is suitable for trading.

There is no one way of conducting technical analysis and everyone has a slightly different way of analysing the technicals but there is a basic principle that applies to most professional traders. The principle is that you are looking for a top down approach. This means that you should not just be focussed on one time frame but instead check all the time frames to get the big picture from a technical perspective as well.

For example, most traders will start on the daily or 4 hour time frame to see what the price has been doing in line with the fundamental trend and also how extreme the price moves have been in that trend. Next they will move down to a smaller time frame such as the 15 minute chart to see what the price is actually doing today in relation to the various measuring tools that we employ. They will then use these entry tools to try and identify an entry assuming that the fundamental analysis matches up with it.

If there is no good technical setup that doesn’t mean you shouldn’t take the trade, it merely means that the trade might be a little harder to execute and manage without that technical structure in place. However, many traders take positions in the markets based purely on fundamentals every single day. The point is that everything is much easier when you add in good technical analysis and this is especially true at the very beginning or your trading career.

To stay tuned in you simply follow this process every trading day from an hour or two before the market opens until the market closes. However, at some point it is also healthy to take some time off.

Traders take time away from their desks for a variety of reasons from holidays to family breaks but also it is good to take a break when you feel mentally exhausted or just tired. Staying tuned into the markets full time is an all-consuming challenge and when you reach the point of exhaustion your trading results will suffer greatly. When you notice your results starting to slide this is the time to switch off and take a break.

A good routine for clearing your head and rediscovering your focus is to simply turn off the PC, get out into the fresh air, and do some form of exercise. Even mild walking is good enough to allow your body to realign and find its focus.

How long you take is up to you and it can be anything from a couple days to a couple of weeks because your own mind will alert you when it is ready to come back. You will start thinking about trading and be anxious to get back into the markets with your normal enthusiasm and will be chomping at the bit to get back to your desk. Make sure to pay attention to these internal signals because they are powerful signals for you to follow. We covered some of these processes in previous sections so it may be worth going back to that to refresh your memory from time to time.

When you have had a break and are ready to come back the question is how do you tune back in quickly?

Getting back into the routines are important and to help with this we have broken the tuning in process into 3 key steps.

3 steps to tuning back into the markets:

1. Read the main feeds of each site in your reading list for all of the highlights or headlines that stand out. For example, all of the sites from the reading list offer great front pages where you can check out all the recent activity and news. Some of these sites also offer analysis and opinions about each event so that you can start to build a picture in your mind of what seems to be going on across the market rather than trying to figure out if one article is more important than another. We are looking for a general theme that everyone seems to be talking about.
2. Once you have read through the headlines you will then click and read each article in full so that you can get a real flavor of what is being said and how it’s been moving the markets. This allows you to determine what is important and what should be ignored. After doing this you will have several currencies that stand out to you that you can focus on heading into your first day back at trading
3. The final step is to make sure that you read any new articles or new points that are released between now and your first trade to make sure that the themes are intact and that you are tuned in correctly.

As you can see, the steps for tuning back into the markets is very much a case of finding yourself back into the big picture first and foremost. This is best to do the day before you start trading again so that your mind has time to digest and reset back to a trading mentality. Once you have done this you can then resume your normal analysis routine on your first day back at your desk.

Now that you understand how to properly analyze the markets you can start implementing this routine every day on your practice account. Over time this will become an almost unconscious practice that you do without any thinking or planning.

Execution Phase

After you have done your analysis comes time to place your trade and this is where we enter the execution phase. This phase begins when you push the button and actually enter the market by placing a live trade.

Once you have entered the market it’s arguably just as important for you to keep an eye on the news feeds and be aware of the audio squawk. This is where those services become the most valuable because if price is moving against you or if anything suddenly happens to move the markets you can react instantly and manage your risks.

While in the execution phase it’s imperative to be focussed on the risk management elements that we looked at earlier while keeping an eye out for any change within the market sentiment.

Constantly monitoring the markets for things that could change your plan is the first step in this phase. However, you should also be looking for known information that could change the sentiment or impact the currency pair you are trading. For example, there may not be anything happening today but what about tomorrow? Are there any upcoming risk events or central bank speeches that the markets could potentially react to?

Part of this process is about looking ahead and constantly being aware of information that could potentially impact your trade. Keeping ahead of the curve will help you have a plan to deal with any potential impact on your trade.

Particular attention should also be paid to your trade management at this point because if you did miss something then you should also have a backup plan in place. This backup usually comes in the form of a stop loss. If the worse did happen and you are unsure or confused then you already have that stop to take you out of the market automatically.

With this in mind it is important to be aware that the stop loss should be placed in a position where you feel it will never get hit under the current conditions if your analysis was correct. This will protect you from random market moves or the typical noise that is generated on an intraday basis. At the same time, having this stop should not expose you to large losses should the conditions quickly change and your trade plan becomes invalid. If your stops have been placed with this in mind then there is absolutely no reason to adjust them after you have executed your trade. If you do sustain a loss due to random moves it simply means that you need to practice initial stop loss placement further to avoid this type of event from happening too frequently.

Remember, every trade, win or lose, is a lesson in itself and should be viewed as such. The decisions you make when your analysis is fresh and your head is clear will always be the very best ones. When the markets change and you become unfocussed then the quality of your decisions will suffer as well. Pay attention to this and work on improving your initial decisions over all others and your performance will improve exponentially.

This leads us nicely into another concept that we looked at earlier which is monitoring your own personal state. It’s important to monitor the markets and the position itself but you should also keep an objective eye on your own personal state. This means monitoring things such as your moods, actions, attention, and energy levels. Are you tired or hungry? Are you angry after a losing trade? These are all clues that could impact your psychology and your state. This is where you can use some of the techniques we looked at in the psychology sections to help you in monitoring and controlling your personal state.

Most traders that lose significant amounts of money do not do so because they have no trading skills. Rather, they do so because they get sucked into a black hole of emotions and start trading for the wrong reasons with no thought about risk management, the prevailing fundamentals, or what state they are in. This is why it’s so important to take the time when you are in a position to constantly monitor and ask yourself how you are feeling and what is driving your emotional state more than anything else.

If you find yourself slipping into a negative state then you should stop trading immediately and take a break as outlined in the analysis phase previously.

Above all else, the execution phase is about following the plan you made when you were not in the markets which is when you were thinking with the most clarity. When money is on the line your emotions will always be impacted to one degree or another. This is just human nature and something that we have to live with as traders but having a clear plan that is laid out step by step will really help you see whether or not you are trading professionally or with too much emotion. The more you deviate away from that plan the more your risk increases and the less likely you are to make a profit.

The trade plan is a guideline or structure to the trade you are placing so you can rationalize exactly what is going on in the market and how you are going to manage it. This is something tangible that you can refer to while in a trade.

Let’s have a look at the core steps that should be in your plan for all the trades that you decide to get into. You will be given a copy of a blank trade plan as part of this course package.

Review Phase

I’m sure that you have heard that 95% of new traders lose money in the markets and fail to become a consistently profitable trader. While there are many reasons for this, one of the biggest reasons is that they fail to pay any attention to the review phase of their trading.

Reviewing your trades and then recording these reviews for future reference can have so many benefits to your long term success. For example, you can look back and chart your progress if you wish. You will easily be able to see the common things you did wrong which resulted in losses time and again. When you see these issues you can work on and perfect them so that they occur less and less.

As with any progress from body building to weight loss, consistency is the key. If you make just one small step of improvement every day, mastery is an inevitability. Not only does it pay to review your trades each day but it also pays to review your trades monthly, quarterly, and yearly so that you can really build up a clear picture of your progress.

Some traders like to get very technical and make complex spreadsheets to track their progress which is fine if you have the time and the knowledge of how to do this. However, there are some simple things that if you do them they will add an incredible amount of value to your trading results and give you clear conviction.

What is in the review and how should you conduct it?

The first part of the review is all about making sure that you can see your progress and your weakness.

The second part is seeing how closely your trades followed your actual plan.

Over time you should see the flaws in your plan. This is perfectly natural and as you iron those flaws out not only will your adherence to the plan improve but the plan itself with become so much more solid and your conviction levels will increase exponentially.

One of the more common issues for new traders is that they call the market correctly but place their stop losses too close to the entry or trail them too close too soon as the trade enters profitability. The markets then come back and stop them out before taking off in the direction that the trader had his trade.

When this happens it can cause a huge amount of frustration and a feeling of hopelessness. However, if you can see that this is the most common cause for your losses then you can focus on this issue specifically rather than feeling like you need to change your entire system as many retail traders typically do. You now know that your major issue is trailing stop loss placement and knowing this you can make a plan that over time your stop loss placement will improve and your profits will increase.

Of course stop loss placement is just an illustration but your trading issues could be anything that is holding you back from your goals. The point is that unless you have a log for you to reviews it is highly unlikely that you will be able to pinpoint the problem easily so that you could make meaningful changes.

Let’s take a look at this process in more detail using the tools that you will be given to help log and track your results. The following is an example of follow up on a trade for you to come to grips with the concept. This is the follow up to the trade plan on the AUDUSD that we showed in the execution phase.

As you can see the review phase is vital for your ongoing improvement and perfection of your trading skills over time. You will not simply be able to take this course and then jump straight onto client accounts making millions. This process takes time and practice but once you do reach mastery using all of the tools and following all of the processes here the amount of the money you can earn is unlimited. You can take your career as far as you wish to go depending on how much of your life you are willing to dedicate to the business of trading.