I also have a full business plan for my trading, because despite having had excellent ideas and strong ability to "read the market", I had a nasty tendency to do all sorts of things like hesitate to put on a trade, then chase in after most of the move was over, or jump the gun and get positioned early at a "much better" price before any signal to trade had occurred, or get nervous and move my stop to break even before the market had a chance to pay me, or turn a day trade into an overnight trade into a swing trade into a long term trade into a "Holy sh*t, just make it stop" huge loss.
My plan is detailed and specific. I don't yet have the ability to trade by the seat of my pants; on the occasions when I do, the results are net negative. I can't trust the voice in my head because it tries to convince me my plan-based trades won't work and it tries to convince me to trade instead what I think price will do (and it has plenty of beliefs about that at all times). So I need absolute rules to keep the odds in my favor.
I know the odds of my trade setups reaching a minimum profit target before hitting a maximum stop loss. Because of this, I have no need to predict direction. There is no prediction nor opinion necessary. The statistics based on extensive research naturally produce profitable results if my execution is aggressive and my trade management is consistent. I may know that every trade I enter based on Setup A has a 70% of hitting profit target X before hitting an equal stop loss Y. So there's nothing at all for me to think about when I see Setup A; I simply place an order and when the order is filled I place my stop loss and take profit at target or better. I know that every single trade based on this pattern has 70% odds of winning if I use an equal R:R. Wow! How much better can it get?
Now I may also have a setup that has a 50% chance of hitting profit target X before hitting a stop loss Y half of value X. Now, how much better does it get than that? There's nothing to think about. Just see the pattern and place the order, knowing that the risk:reward is seriously in my favor and the odds are 50/50.
The plan itself is a little more than 20 pages, but the supporting documentation out of which the plan evolved includes a 420-page trading journal and more than 150 statistical analyses of the application of various trading ideas to daily price action (including entries, exits, contextual descriptions, max favorable and adverse excursions, and the results of various trade management ideas). These are real painstaking analyses, not computerized backtests.
This took an enormous amount of work, but it took me from a financial and psychological "bottom" to trading for a living and looking forward to it every trading day.
If you want any feedback on your plan-in-progress, I'd be glad to help!
The following 19 users say Thank You to rubyslippage for this post:
This is absolutely not ironed out yet, but it's what I've put together so far. There are several of you that have made recommendations regarding trading plans, and I'd love to hear your input on this. I want this trading plan to be detailed enough so that if you've read this plan, and you see what I post that I did in the future, you could tell if a decision is in violation of the trading plan or not.
The important section starts with the blue heading a ways down below from the start of the trading plan.
I won't bore you with all the details, but I'll cover all the section headings, and I'll include the meat of the plan which includes how I'm managing risk, how I'm managing trades, and how I'm entering trades.
NEXT TRADING PLAN REVIEW DATE
- May 18, 2013. (Monthly)
- Stage 5
24hr trade desk
Anthony and Max direct #'s -
TABLE OF CONTENTS
Read on short term orderflow
Emotion and lack of proper belief systems
Overtrading/whim/revenge/chasing/low probability trades
- Plan for managing my current weaknesses:
Have a reason for every trade
Continually improve self awareness and self-discipline
Creating this trading plan to follow
I will achieve a healthy mind through praying, reading, trading, playing guitar/violin, and chess.
I will achieve a healthy body though playing tennis, golf, yoga, etc and sweating once a day
I will achieve a healthy work/life balance through making sure I devote time each day to Jess, stay in touch with my parents and sister, as well as see my friends and keep up with their lives.
- Broker S5
- Charting - Sierra
- Data Providers T4/OEC
Trade Log In order to capture entry/exit reasoning, ideas, things noticed/learned during the session, emotions, daily review notes, as well as keep up with process goals.
Trading Spreadsheet In order to keep up with key statistics and monitor trading performance in an unbiased manner.
- Economic Calendar
- Procedures Manual to detail daily routines, including pre-session and post-session routines.
- The Procedures Manual is to detail plans for dealing with any contingency which may occur during the trading session.
Market Structure Review
Process goals for next session
- Weekly/ Monthly
Key lessons learned
- Biannual/ Annual
HERE'S THE IMPORTANT SECTION FOR POSTING ON futures.io (formerly BMT) PURPOSES
- Im trading the ES during RTHs. I use market profiles and daily charts to determine longer term context. I look at the overnight action and where were opening relative to previous sessions profiles. This is all to determind the state of balance/imbalance.
- I then use key levels such as S/R, prev POC, prev high, prev low, IB, IB Ext, prev close, prev VAH, and prev VAL to lean off of these levels for trades that make sense within context.
- VWAP and its stdev bands are also used to keep things in perspective. Ideal trade locations are either fading band extremes, or taking pullbacks to VWAP itself. VWAP is also used to gauge the end of a trend, and when switching to a rotational strategy vs trending strategy is required.
TPO balance/imbalance recently
Brackets and S/R on daily charts
Where are we opening relative to ^^
Inside previous sessions value area
Outside previous sessions value area
Entry aligned with trend on pullback to key area
Target or stop
Adding to positions NOT allowed for any reason
Scale outs Can take ½ off whenever it feels right. The rest must play out to plan.
- Other Risk Management
No trades until AFTER opening swing is in place
News Flatten any position prior to major news unless built a > 2 point cushion
Re-entry 2 max attempts per any one setup
Daily Loss limit - $1,600 (gross)
3 losing trades in a row = 10 minute break away from charts
Accidental trade error/wrong click manage trade extremely tight either it moves directly in favor/ scratch at BE / exit immediately
Blatant breaking of a risk rule = donate your trading account to charity
This is still discretionary trading. My view of context and PA will certainly shift intraday at times, but I must have a reason behind any trade taken.
-Market has been imbalanced and trending down
-Yesterday closed down below daily bracket (range area), but, price hasn't been able to spend much time down here lately as it gets bought back up, BUT, this morning will be the first time we close below the bracket AND open the following session still below...
-ON session balanced on top of yesterday's VA (value area)
-Open within prev VA
Based on this, my ideal trade location will be
shorts near prev POC at 1541.25 or
the prev VAH(value area high) which coincides with the daily bracket low at 1543.50
I'm keeping the gap down below in mind (1527.25 down to 1521.25)
1535.50 (around yesterday's close*) has been the support level keeping price from this gap, so it's another key area to watch if we trade down that way. This also lines up with yesterday's VAL (value area low).
This of course is just an initial game plan, and I'll adjust as price action unfolds.
The following user says Thank You to indextrader7 for this post:
Fascinating discussions here.
Rubyslippage, very impressive arguments you gave on your last posting. I am on the same path; I have a full trading plan and I am building my statistical data base all manually using my excel skills and creating the analytical views while capturing as much information as possible about each trade.
I was wondering if I could ask you all for a quick feedback on something. If you believe my question is inappropriate for this thread, please accept my apologies. I've been patiently waiting for Ninja Trader to come back online with TST, but it sounds like it's not coming back any time soon. I was curious to learning your thoughts about using Ninja to generate the buy & sell according to my rules, but execute the trade on T4 using their DOM. The indicators I use are only for NT, that's why I need it. Does anyone have any insights into that? Is it practical and doable to have two platforms on screen? Thank you all.
The following user says Thank You to gabrielc for this post:
Yep, got stopped out to the tick up there. I don't understand the concept of poor high/low (or even a strong high/low?). Could you tell me a little about what defines one of these and how you apply it to your trading?
The following user says Thank You to indextrader7 for this post: