Intermediate Term Trading Plan Overview

This lecture provides an example of an intermediate-term trading plan, emphasizing the importance of patience and prudent decision-making. It is a theoretical model to help determine whether you have the capacity to be a trader and follow such a plan.

Key Concepts

• Intermediate Term Trading

  • Focuses on daily charts.
  • Trade durations can last weeks to months.
  • Requires patience and discipline.

• Market Conditions

  • Bullish Conditions
    • Look for seasonal tendencies indicating bullish markets.
    • Monitor interest rates for higher movements or yield divergence.
    • A weaker US dollar is expected.
    • Treasury notes (2, 5, 10-year) should decline.
    • Commitment of Traders (COT) report should show commercials net long or reducing shorts.
    • Daily chart should be oversold using Williams %R.
    • Stock indices and commodities should show bullish signs.
  • Bearish Conditions
    • Opposite of bullish conditions; interest rates lower, stronger US dollar.
    • Stock indices and commodities should indicate bearish markets.

Anticipatory Stage

• Identify higher time frame monthly, weekly, and daily key support/resistance levels.
• Yield Observations
  • Yield divergence between US and German/UK bonds can indicate shifts.
  • Monitor US dollar index for SMT divergences.
• Correlated Pairs
  • Watch for correlated pair SMT divergences between EUR/USD and GBP/USD.
  • Stock market indices should be monitored for SMT divergences.

Execution Stage

• Determine if the market is risk-on or risk-off.
• Use key support/resistance levels to guide trades.
• Transpose higher timeframe levels to lower timeframes (60, 15, 5-minute charts).
• Trade in the direction of daily market structure.
• Use optimal trade entries based on chosen patterns.

Entry and Risk Management

• Trades should be entered during major session opens (London, New York, or the relevant market session for the currency pair).
• Use limit orders at Fibonacci retracement levels (60-79%) for entry.
• Maintain a maximum risk of 2% per trade.
• First profit target is 30 pips to secure risk-free status, followed by scaling out at Fibonacci extensions (127%, 162%, and possibly 200%).

Example Analysis

• Case studies on the US Dollar Index, EUR/USD, and GBP/USD showing application of the trading plan.
• Importance of monitoring COT reports, open interest, and interest rate markets in conjunction with seasonal tendencies and SMT divergences.

Additional Concepts

• Fibonacci and Extensions
  • Used for determining entry and profit targets.
• COT and Open Interest
  • Indicators of commercial trader positions.
• SMT Divergences
  • Identify potential turning points.

Conclusion

Understanding and implementing a higher timeframe analysis can significantly enhance trading strategies, especially for intermediate terms. This plan is a framework to develop patience and anticipatory skills, transitioning into a more advanced trading mindset.