No registration required! (Why?)

Newbie's Trading Plan Draft - What do you think?

Hi, I am just getting started and have not even traded real money yet. There is a lot to get a handle on first and one of them is having a plan. I wrote this as an outline or draft if you will and was looking for some feedback from the people who know, so there it is, Thanks!

Trading Plan Draft

1) Learn about proper money management first! Especially your own risk/comfort level.

2) Are you ready to trade today?
a. Are you tired or preoccupied with something? If so, don't trade. Use the day to read and educate yourself on the market.
b.Do you feel ready to battle? Only approach the day confident and always be aware, you are trading against other, not just little lines!

3) Get ready before the market opens:
a. Identify trend first. Start from highest to lowest time aggregation charts; weekly, daily, hourly, etc.
b. Get charts ready for the day. Go over them; update pivots, trend lines, Fib. Etc.
c. Know what reports are coming out that day and at what time so you don't get blindsided.

4) Getting into a trade:
a. Know the time aggregation you are going to trade.
b. Predetermine the setups you are going to use. Test them first paper trading till they are ready and you are feel confident in the risk/reward. Don't chase, wait till your conditions to enter are meet.
c. Decide where your protective stop is should be before entering each trade. Make sure they are determined by market conditions and that they meet your comfort/risk level.

5) Exit plan:
a. If not stopped out by protective stop, manage trade by moving stops accordingly to lock in break even first, then give room before moving with price to lock in profits accordingly.
b. Use targets such as moving averages, pivots etc. to take the most out of the trade.
c. Have order in place to re-enter trade on other side of resistance to reenter trade if resistance is broken.
6) End of day:
a. After market close and you are done trading for the day; go over your trades to see what worked and what didn't. One day dose not make a trend. Make adjustments to setup and money management plan after enough time and data has been evaluated, not because you had one bad day that day.

7) Always continue your education. Read, webinars, etc.

Congrats on taking a good start by working on your trading plan before putting your money on the line ! Please accept the following comments / suggestions from someone who was in the starting blocks 4 years ago, and is still fighting to move from break-even+ to consistently profitable :

- I would place your trading education as #1 in your plan. Trading isn't easier than most other jobs, it takes a lot of quality education and a lot of practice to make it. Having a mentor would help, too.

- I would place #2 in your plan : having a proven edge. An edge is essentially a trading strategy + all associated tactics that place the odds in your favor over the long-term. A proven edge is an edge that you have proven to yourself, through backtesting as a start, then forward testing in simulation mode.
I suggest working on ONE setup at a time (back-testing / forward-testing / real-trading), only adding a second setup once you are totally comfortable trading the 1st one.
In my opinion, most markets have different characteristics, and even though the same strategy can be used on different markets, it is likely that you will have to adjust the tactics to every specific market, so start with ONE setup on ONE market, and expand either the setup to a second market, or a second setup to your primary market, but in all cases, try to stay focused.

- Risk management & Money management would come next ... you need to define your maximum risk on a trade (as a starting point, you could use 0.5% to 2% of your trading capital, but there is a ton more to this), also it would be wise to define your maximum daily/weekly/monthly drawdown (at what point you stop trading for the day/week/month after a series of losing trades).

- "Are you ready to trade today ?" is IMO a much overdone matter ... you are the boss ... how often as a boss are you willing to let an employee "off" because that employee isn't in good enough shape to work ? Also consider that trading is a highly competitive activity ... you as a trader must be fit for that competitive activity on a daily basis, not all days are created equal, you have to be there when the big opportunity arise, no excuse...

- Getting ready for the trading day is great ... but realize FOREX and a lot of futures markets are traded around the clock, and the best trading hours for a particular market may not be your "9 to 5" window ... if you trade FOREX, "market open" is likely the London open, if you trade commodities such as Crude Oil / Gold / ... the "European" session can be as lively an profitable (and sometimes more profitable) than the "US" session ...

- Keep a trading journal (in a spreadsheet format) ... record for every trade as much quantitative data as you can (your trading platform might give you a solid hand here by providing entry/exit price/time/qty), as well as the SETUP, and your qualitative observations (both of price action before/during/after the trade but also YOUR behavior)
Very insightful TraderX, especially for someone so new to trading.

I especially applaud lines 1 and 2. Many people treat Money Management almost as an after thought or a necessary evil instead of giving it the priority it deserves. One of my own AHA moments in trading came when I focused alot more attention to how I managed my trades and contracts.

As important as MM is I've learned that it takes a back seat to what I call Daily Psychology. For this reason I would switch your top two lines. DP to me is making sure that I am firing on all cylinders before I take a trade with real money. For example: am I focused, am I reacting in a timely manner, am I reasonably reading the market correctly, am I missing patterns, levels etc. If not I don't trade until I am. I have found that there is no setup or system out there that is SOO GOOD that I can't screw it up.

I would make a change to that line that you try to get your head right first before abandoning the whole day by taking some SIM trades, but if you still can't DON'T trade.

Here's a brief list of my trading hierarchy:

1) The setup

2) Money Management (10 x more important than the setup)

3) Psychology (10 x more important than MM and 100 x more than the setup)

One last thing to consider is to try and make it so all aspects of your trading plan work together and compliment each other. For example: since Psychology is #1 in my value system I design my MM to compliment that by taking some profit early and exiting quickly when a trade goes against me. Since MM is #2 in value system I adapt my setups to compliment my MM by choosing setups that will allow me to quickly take profits and enter a free trade as soon as possible.

I realize that this is a brief explanation, but I hope you get the general idea.

Again Hats off to Ya for recognizing some often overlooked aspects of trading!
Thank you in advance to all who take the time to write and give your comments and suggestions to someone just starting out. I do, fully understand that having a plan is paramount and that one better be prepared if they ever expect to be successful. In my opinion, all the items on the list are indispensible no matter the order and would like to know if there is anything missing or advice as to achieve each. My hope is not only for myself to benefit from the advice offered here but for all people, who like myself, had on idea where to start when it came time to put pen to paper to write their plan.

Emini Day Trading / Daily Notes / Forecast / Economic Events / Trading Indicators / Search / Terms and Conditions / Disclaimer / Books / Online Books / Site Map / Contact / Privacy Policy / Links / About / Day Trading Forum / Investment Calculators / Pivot Point Calculator / Market Profile Generator / Fibonacci Calculator / Mailing List / Advertise Here / Articles / Financial Terms / Brokers / Software / Holidays / Stock Split Calendar / Features / Mortgage Calculator / User Pages / Donate

Copyright © 2004-2018, MyPivots. All rights reserved.