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Trading with a "plan"
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Trading with a "plan"

  #1 (permalink)
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Trading with a "plan"

Everyone seems to say it's important to have a "plan" in trading. I do agree that there is large value in not just shooting from the hip, but having a plan in the sense of a methodology to operate from.

I have had some great days recently where I simply made myself open to the flow of the market (crude oil, as I detest the (lack of) flow of the eminis like ES right now), and caught some great moves, not taking profit at a preset point, just riding the wave. For some, it seems a plan is having a specific profit target, a bias towards trend direction before the day even begins, key support/resistance levels based on volume profiling, etc...

As I'm working on volume profiling right now, I find it interesting, yet I wonder if it truly adds to the bottom line in terms of useful information. When I'd paid too much attention to this extra noise, I've often gotten myself out of good trades early, or set stop loss levels too high because of what I expected to the market to do.

In his great book (I think it's called "The Disciplined Trader") Mark Douglas spends a LOT of time elegantly laying out what basically comes down to this: BE OBJECTIVE, and BE OPEN to what the market is saying. Might having too much of a plan violate this wise advice?

So, is trading with this kind of plan really a good idea? Everyone will be different I understand, not looking for an answer for ME, looking for how YOU feel.

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  #2 (permalink)
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  #3 (permalink)
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Josh, an excellent place to start is looking at the regular Journals and the Elite Journals. Read the posts the author makes. See how they define their plan, and then read them in chronological order and see what happens over time.

I want to say that creating a journal is crucial in success, and making one public has huge benefits (accountability, plus learn from others) but it also is hard to do (pride) so these guys should be highly commended. That said, as an outsider (the one reading the journal) it will likely be pretty easy to spot some big problems that the original author doesn't see or acknowledge. That alone is priceless information, so my recommendation is to learn from others by reading their journals --- help them out as well by questioning their decisions when they don't agree with their pre-stated rules, you'll be doing them a favor --- and then make your own journal and start moving forward with your trading.

You can start a journal even before you have a 'plan', the journal process will help you realize what works for you and what doesn't and help get you going down the right direction. It all takes time. It may take you weeks or months to find the right instrument for your trading style, and then many more months to trade that instrument well. Many say 10,000 hours is needed, just be sure you are always building it in a logical manner and moving forward and not sideways. 2,000 hours on 5 completely different trading methods is not going to be as rewarding as 10,000 hours with one similar method.

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Last edited by Big Mike; February 9th, 2011 at 12:10 AM.
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  #4 (permalink)
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If you open a business without a plan and just go with the flow, how successful do you think your business will be in 12 months?

Without a plan:
How would you know if you are meeting/not meeting your goals and if what you are doing is worthwhile?
How would you know what position sizing to use?
When you should stop trading and take a step back to review if you are still on track?
How much to risk on each trade?
What to do on days when riding the waves result in loss after loss?
How would you know if you are still riding the waves if you don't know how define a wave?
How would you know when the wave is over?

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  #5 (permalink)
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josh View Post
Everyone seems to say it's important to have a "plan" in trading. I do agree that there is large value in not just shooting from the hip, but having a plan in the sense of a methodology to operate from.

I have had some great days recently where I simply made myself open to the flow of the market (crude oil, as I detest the (lack of) flow of the eminis like ES right now), and caught some great moves, not taking profit at a preset point, just riding the wave. For some, it seems a plan is having a specific profit target, a bias towards trend direction before the day even begins, key support/resistance levels based on volume profiling, etc...

As I'm working on volume profiling right now, I find it interesting, yet I wonder if it truly adds to the bottom line in terms of useful information. When I'd paid too much attention to this extra noise, I've often gotten myself out of good trades early, or set stop loss levels too high because of what I expected to the market to do.

In his great book (I think it's called "The Disciplined Trader") Mark Douglas spends a LOT of time elegantly laying out what basically comes down to this: BE OBJECTIVE, and BE OPEN to what the market is saying. Might having too much of a plan violate this wise advice?

So, is trading with this kind of plan really a good idea? Everyone will be different I understand, not looking for an answer for ME, looking for how YOU feel.

In my new book coming out this fall, "Blowing Up Your Account ... for Dummies", I spend a LOT of time elegantly laying out what basically comes down to this, Trading without a plan is in essence a plan ... a really bad plan... but a plan none the less. If you want to be consistently profitable, use a better plan.

Trading Plan 101:

1. When do I enter a trade?
2. When do I exit a trade?

If you can't answer those two questions, you don't have a plan ... and that whole "make yourself open to the market" thingie ... I think that's what we used to refer to as "Bending Over". Trust me... the market will accommodate you.

Now I plan to take a nap and make myself open to sleeping...

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #6 (permalink)
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Thanks all for the replies... great food for thought. As an aside, I'm paper trading only. I claim newbie status, and claim to know next to nothing about trading. Hence my trying to get good advice from others.

First of all, ThatManFromTexas-- since you're writing the book, may I ask: how many accounts have you yourself blown up, and how long did it take you to become consistently profitable and avoid blowing accounts? Since you "wrote the book" (pun intended!) I would expect you have some experience in the subject of blowing accounts and hence wise advice on how to avoid doing so!

I currently have in my "plan":

- instrument of choice
- risk per trade, and position size based on that
- trading hours
- basic "style" of trading (e.g., breakouts with a trailing stop loss)

What I *don't* have is:
- strict rules for entry (MA crossover, RSI level, 3 green candles in a row, delta level above X, etc.). I trade using price action followed by heavy volume for confirmation, again, usually breakout levels. I do have S/R levels based on volume profiling and visible levels, and I pick my entries based on these levels primarily.
- strict rules for exit (20 ticks, when $TICK hits 800, and so on). I use a trailing stop. I do have a general rule regarding moving stop to B/E, but again, I'm open to letting it breathe.


From my (bad) experience 4 years ago in trading, I know that it's unwise to have NO plan. I'm talking about, rather, being so tied to rules that it leaves one inflexible for potential market changes. Perhaps it's down to the mechanical vs. discretionary styles that so many people discuss and argue over. Mr. Mechanical says that no emotion, no discretion, and only hard and fast rules work. Mr. Discretionary likely has too few rules and is in for trouble.

The thing is, almost everybody says "you must know when to enter, when to exit, what your levels are, etc., etc." -- yet most people are not profitable (95%?). Particularly on internet forums, most people tend to talk like they know what they are talking about, but statistically most of them are just BS-ers. So when EVERYbody says something, I tend to take a step back and try to look at it objectively, rather than just taking for granted that they know what they are talking about.

Again, thanks so much for the replies, please keep them coming!

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  #7 (permalink)
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josh View Post
Thanks all for the replies... great food for thought. As an aside, I'm paper trading only. I claim newbie status, and claim to know next to nothing about trading. Hence my trying to get good advice from others.

First of all, ThatManFromTexas-- since you're writing the book, may I ask:(1) how many accounts have you yourself blown up, and (2)how long did it take you to become consistently profitable and avoid blowing accounts? Since you "wrote the book" (pun intended!) (3)I would expect you have some experience in the subject of blowing accounts and hence wise advice on how to avoid doing so!

I currently have in my "plan":

- instrument of choice
- risk per trade, and position size based on that
- trading hours
- basic "style" of trading (e.g., breakouts with a trailing stop loss)

(4)What I *don't* have is:
- strict rules for entry (MA crossover, RSI level, 3 green candles in a row, delta level above X, etc.). I trade using price action followed by heavy volume for confirmation, again, usually breakout levels. I do have S/R levels based on volume profiling and visible levels, and I pick my entries based on these levels primarily.
- strict rules for exit (20 ticks, when $TICK hits 800, and so on). I use a trailing stop. I do have a general rule regarding moving stop to B/E, but again, I'm open to letting it breathe.


From my (bad) experience 4 years ago in trading, I know that it's unwise to have NO plan. I'm talking about, rather, being so tied to rules that it leaves one inflexible for potential market changes. Perhaps it's down to the mechanical vs. discretionary styles that so many people discuss and argue over. Mr. Mechanical says that no emotion, no discretion, and only hard and fast rules work. Mr. Discretionary likely has too few rules and is in for trouble.

(5)The thing is, almost everybody says "you must know when to enter, when to exit, what your levels are, etc., etc." -- yet most people are not profitable (95%?). Particularly on internet forums, most people tend to talk like they know what they are talking about, but statistically most of them are just BS-ers. So when EVERYbody says something, I tend to take a step back and try to look at it objectively, rather than just taking for granted that they know what they are talking about.

Again, thanks so much for the replies, please keep them coming!

I think ya got a bur under your saddle there young fella...

1. None.

2. See number 1.

3. I was down at the VFW post a while back and asked them how they knew anything about not getting killed in war since none of them had been killed in war ...

4. When I was a young fella I called upon a company in the "O'l Bidness" and tried to "help" the owner see how to improve his business. He said , "Son, let me show you something" (In Texas when a man starts off the sentence with "Son...", you know you done screwed up) We walked outside , he pointed to the top of the building and said, "You see who's name is on that building, Mine. When your name is on that building you can tell me how to do my business."

I don't tell other folks how to do their business. I suggest you do whatever works for you.

5. You will hear all kinds of "facts " being quoted on the internet, people repeating unverified jargon that the uninformed person ahead of them said. Could someone kindly show me the in depth scientific study with supporting empirical data that substantiates and concurs with the conclusion that;

A. The percentage of traders who fail ="X"%. Did someone actually interview EVERY trader and verify their trading success? Is this study continually updated , since the proliferation of electronic trading?

B. You need "X" hours of screen time to be successful. Did someone actually sit a control group in front of screens for "X" period of time and match their progress with the other group that did not have the same screen time? Or did they make a bunch of mice watch videos on stealing cheese and then extrapolate the numbers to relate to traders? Pray tell what yardstick was used before retail electronic trading emerged in the 1990's.

C. Particularly on internet forums .... statistically most of them are just BS-ers. [Citation Needed]

Everyone on the internet lies. If this be true... then this statement is a lie ... which means that this statement is true ...

My only advice is...
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


Have a nice day.

Regards,
TMFT

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #8 (permalink)
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TMFT, thank you for your post. After doing a bit of research, I've taken your advice and tried to switch my discretionary brain over a bit more to the mechanical side, and today developed some entry methods based on common indicators that will at least give a bit more guidance and a bit more mechanized approach. If I can get a reliable signal based on technical analysis, followed by using these signals at key levels based on my volume analysis, and finally by confirming with price action like I like to do, then I should have a much higher probability. Again, thanks for the advice, and I hope you didn't take my post as too much in-your-face, I'm just very direct. By the way, when is your book coming out? Any chance I can get an advance copy? :-) Maybe I'm pushing it but it never hurts to ask--please let me know when it's available so I can purchase.

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Making a plan

When reading on futures.io (formerly BMT) about a methodology one could argue ok this is the point of view of one guy, how does the concept relate to a statistical population of traders. Find attached a recent survey including 700 traders (Pros, semis, newbies) you will discover that much of the results are topics already discussed in this forum. With regards to this thread (but many others as well) have a look at page 5, profit increase over time only if post trade analysis is done.

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Trading with a "plan"-tradersurveyresults.pdf  
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Thanks for this!

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