A simple step-by-step trade routine

forex training trade plan

It’s all about the fundamentals

All of my trading is based on fundamental analysis, which means that I enter new positions based on what has happened in the financial news and any significant economic indicators that have been released.

There is a strong element of sentiment analysis in my trading. This is where traders need to ‘tune’ into the market and figure out exactly why it is moving in the way that it is.

In essence, sentiment is the reason why the current market moves are happening. For example, the fundamentals could show reasons to buy the US dollar; but the market may be anxious about something else entirely, which then causes traders to instead sell the currency.

These types of moves are not problematic to long-term traders. They can however seriously impact the profitability of short-term traders, if the individuals involved are not paying attention to them.

Technicality matters too

When looking to enter a new position in the market, I do conduct limited technical analysis. This is designed to give me the best possible entry point into the market to ensure limited drawdown.

When analyzing a price chart, all I am looking for is previous buying or selling zones that traders have recently used to enter or exit the market from. These levels are also known as ‘support’ and ‘resistance’ areas.

I do not use any other type of technical analysis, such as ‘indicators’ or mechanical ‘systems’. In my opinion, traders that depend on these methods alone will really struggle to make a consistent profit from trading the currency markets.

Placing my trades

Once I have the trading bias - either long or short - from the current market sentiment, I then place my trades and monitor the various technical levels for possible entries.

My trades are again managed on the principles of fundamental analysis and sentiment. This helps me to hold my trades through drawdown; because even if the price moves against me, I have a strong reason to remain confident in my original position unless the fundamentals or sentiment that caused me to enter change.

For example, if the bias is short, but a string of positive economic data is released during the trading session, there is a good chance that the sentiment can reverse and change the bias to long. With this in mind. it is very important for traders to constantly monitor the news feeds and remain abreast of what is moving the markets whilst trading.

Exiting trades

I usually exit trades based on the average daily range of the currency I am working with. Put simply, if the price of a currency reaches what recent data would suggest is close to its optimum price, there’s a good chance that the currency will stop moving in that direction for the rest of a session. I consider it worthwhile taking profits at this point.

Be open to learning and persist

The key to successful trading is a consistent process of practice and evaluation. Plan your trades thoroughly, assess the outcomes and monitor how your management of the trade affected your profits.

It’s important to be open to development too. Despite the many years I have spent trying to master FX trading, I am always learning and experiencing events that move the markets in a different way. With this in mind, it is absolutely vital for traders to accept that nobody knows all of the answers and that there is always more to learn.

If you want to know more about how I trade the currency markets, I share my thoughts on a daily basis about what traders can expect from a trading session via the ‘FX Insights’ section of my website.

Traders can also receive my weekly trading recaps and market summaries by signing-up to my free ‘FX Pulse’ newsletter, which is distributed every Friday.


Step-by-step trade plan:

1. Before your trading session, read the latest financial news across a variety of feeds to get an overall feel for what the market is focused on and what key events are influencing its movements and sentiment.

2. Select the themes that are the most prevalent and identify which currencies these are impacting the most.

3. Identify the ideal entry points on each currency in the direction of your bias, based on previous buying and selling zones that traders have been using recently.

4. Enter your positions in the direction of your bias.

5. Identify exactly what must happen for you to lose conviction in your position and ensure that you do not lose confidence in your stance by random market moves against your original judgement.

6. Identify key areas that could see the price struggle - such as support and resistance areas, or the average range limits of your currency pair - and take your profits at the optimal point.

7. Repeat this process on your next trade and practice executing this approach

Jarratt Davis