The Investor Diary Entry #87: October 9, 2025
In my ongoing effort to build a systematic Forex trading plan, I am documenting each step of my testing process. This personal diary serves as a record of my learning, not as advice. After establishing how to identify a trading range and the role of inducement, the next logical step in my testing is to determine where to place trades within that range. This post details the process I have adopted for identifying what are called Points of Interest.
The Foundation: Revisiting the Trading Range
The testing example is going to be on the GBP/USD pair, and the methodology I am experimenting with requires a clearly defined trading range. As I documented previously, I identify a range by locating a change of character (Choch) or a break of structure (BOS) as per the SMC methodology. In the accompanying video example, what we are seeing is a change of character; a shift from a bullish to a bearish sentiment, and then confirming its boundaries by observing when key inducement levels are hit.
In the scenario I am analyzing, the market is in a bearish move, and a new range has been confirmed after a break of structure. The high of this new range is identified by the deepest retracement from the previously confirmed low. The low of the range is the most recent low, but it is only considered valid once its corresponding inducement—the pullback immediately before that low—is traded through. This process of validation is something I am paying close attention to in my testing, as it forms the basis for all subsequent actions.
Defining Potential Entry Areas
With a confirmed trading range established, the next part of my testing involves identifying Points of Interest. These are specific areas within the range where I may look to enter a trade. The concept I am working with is that these areas represent pockets of liquidity that the price may revisit before continuing its intended journey toward the other end of the range.
In a bearish range, I am testing how to locate these Points of Interest near the top of the range. The methodology I am studying suggests first looking for unmitigated order flows, which are specific movements within the range that have not been invalidated by subsequent price action. If no valid order flows are present, the next step is to look for order blocks. An order block is essentially a candle with a noticeable gap or imbalance that has not yet been “filled” or mitigated by price.
In my test case, the valid order flows were mitigated, so I focused on locating an order block. I identified a specific candle near the top of the range whose high and low prices had not been entirely traded through. This zone became my primary Point of Interest for a potential sell trade. The theory I am testing posits that price may return to this area to take liquidity before moving down toward the range low.
Integrating Risk Management Parameters
Identifying a Point of Interest is only one component of the plan I am building. A critical part of my testing is integrating strict risk management rules. These are the two pillars that I talked about before as the rules to become a successful trader. For every potential trade, I calculate the distance between my entry point and my stop loss, which I place just above the range high.
I then convert this distance in pips into a percentage risk of my trading capital. My personal rule is to risk between 0.5% and 1% per trade. In this specific test, the pip distance required a position size that resulted in a risk of 0.683%, which falls within my predetermined parameters. This disciplined approach to position sizing is non-negotiable in my testing; it is the mechanism that ensures I can continue to trade and learn even through a series of losses.
A Live Test and Its Outcome
After setting a pending sell order at the Point of Interest, I observed the market. The price did move into my order block and my trade was executed. However, the market did not respect the level as the theory suggested it might. The price broke through the order block and continued to move higher, eventually triggering my stop loss.
This loss is not a failure of the process but a valuable data point. It highlights a key aspect of what I am learning: no single Point of Interest guarantees a successful trade. The market may sweep through one liquidity area on its way to another. This trade provided a clear example of a concept I am still grappling with—how to distinguish between a true rejection at a Point of Interest and a temporary pause before a liquidity grab at a higher level.
Conclusion and the Next Step in My Testing
This exercise in identifying and acting on a Point of Interest was a practical application of the plan I am constructing. It reinforced the importance of having a predefined structure for entry and, just as importantly, a strict rule for exit when the trade does not develop as anticipated.
My next task is to analyze the broader results of this methodology. I have been conducting a dedicated back-test through a free backtesting software from a specific period, and I am now compiling the data on win-loss ratios and overall performance. In my next post, I will document the results of this testing phase and discuss the adjustments I am considering for my Forex trading plan.
The Investor
Thursday 9 October 2025
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second, as a place where I can share my ideas publicly, not only on stock investment, but on any venture that I start learning, such as Forex Trading, Blogging, or any other future venture that I might think of trying out.
By repeating things I learn to myself and trying to explain it to others, I help myself better understand what I am learning. Additionally, hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking tihose links, I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
For more detailed information on my affiliate disclosure, please refer to the Full Affiliate Disclosure page.
This blog is also part of my blogging learning project. I’m using a platform to learn this part. If you are interested in it, it is called Wealthy Affiliate.
Furthermore, this site is in no way or form giving any financial or investing advice, nor is it encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my own progress and share it for informational, educational, and entertainment purposes.