In just over a week, the Bank of England MPC are due to meet for a vote on setting interest rates. Forex Factory is currently forecasting a hold at 0.75% however, Trading Economics are predicting a rise to 1%. I am preparing to purchase GBP.

Economic Indicators are light up to the meeting so no barriers there.

Live Charts are showing the strength on GBP to be strong thus not a great time to enter right now.

Geo politically, Brexit is a huge dilemma and given traders indecision.

A perfect entry is the GBPJPY day support at 142.20

A good entry is the GBPJPY 4 hour low at 145.20

Review and Preparation [REVPREP]

  1.  Fundamental Data
    • Update Indicators that have new data released
    • Make a note of Indicators and its currency that have data out shortly
  2. Sentiment Data
    • Working through the currencies that have had new data out today
      • update the Previous, Next and Horizon.
  3. Summary
    • Review the Summary data and note the currency pairs that are determined suitable for trading, Tradeable Pairs [TRAPS].
  4. Technical Analysis
    • Abort/cancel the trades on MT5 and close the charts for Untradeable Pairs [UNPA]
    • Go through Technical Analysis Process for the TRAP’s
  5. Orders
    • Enter orders into MT5
  6. Record activities in Trading Journal.

Session Preparation [SESPREP]

  • Identify currencies that have a data release in the coming Session(s), Currencies of Interest [COI]
  • Determine if there is a TRAP and what its Risk Profile would be if the data is:
    • better than expected
    • as expected
    • worse than expected
  • Prepare the charts of any potential TRAP’s

Currency Evaluation [CUEV]

  • Using an Economic Calendar, calculate using predetermined metrics what direction the sentiment has swung. Record the direction.
  • If the data is an indicator used to measure the Fundamental Direction then also record it as such.
  • The recorded result could determine a TRAP.
  • Use previously prepared chart to identify suitable placement of entry.
  • Place order on MT5.

Fundamental Analysis is done to determine the Economic Direction of a currency which can be measured on a scale of:

  • Bullish
  • Indifferent
  • Bearish

Calculating the direction is done by reviewing the high level indicators of the following categories and reporting the average.

  • GDP Growth Rate
  • Unemployment Rate
  • Inflation Rate
  • Interest Rate
  • Balance of Trade
  • Government Debt to GDP

When reviewing the indicators, take note of the direction over the last twelve months and report as either:

  • Improving
  • Flat
  • Worsening

The direction of Inflation Rate is reported three times and Interest Rate is reported twice as these are considered to carry more weight.

The best place to review this data is at Trading Economics. For example, here is the link for United States.

 

Long Term Trend

Review the timeframes beginning with the longest and identify the long term trend. Using rectangles, highlight the trend reversal line’s, on both Fibonacci and Line charts. The trend reversal line should ideally have at least 2 hits if possible. The rectangle height cannot be too large and has a limit of 200 pips.

This rectangle is referred to as the Trend Reversal Zone [TRRZ].

2

1

Short Term Trend

Now reduce the timeframe until you see a defined trend that bounces the Long Term TRRZ’s. Overlay a Fibonacci retracement and identify the fib level that was most recently tested, this is known as the Trend Break Point [TRBP].

Using the TRBP as a guide, highlight the short term TRRZ. The rectangle size should be restricted to a maximum of 100 pips.

3

Micro Term Trend

Now reduce the timeframe again, until you see a defined trend that bounces the Short Term TRRZ’s. Overlay a Fibonacci retracement and identify the fib level that was most recently tested, the TRBP.

Using the TRBP as a guide, highlight the micro term TRRZ. The rectangle size should be restricted to a maximum of 50 pips.

Summary

With the chart now containing the overlays that detail the trends, you are better informed to decide appropriate places to enter the market. It is important to restrict entries to the TRRZ’s.