Trade your plan

nunrgguy

nunrgguy

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An oft received piece of wisdom is to trade your plan and plan your trade. Do this with discipline and you cannot (or should not) fail.

Can anyone spot the problem with this?



(footnote: oops here we go again questioning received wisdom from above. I heartily expect many catty comments lolz)
 
If your plan is crap, then following it wont do you much good. Other than that, it's no worse than other trading cliche's/truisms out there.

One thing though - your plan does need to include what to do as things change once in the trade.
 
DionysusToast said:
If your plan is crap, then following it wont do you much good. Other than that, it's no worse than other trading cliche's/truisms out there.

One thing though - your plan does need to include what to do as things change once in the trade.
Click to expand...

Hit the nail on the head on the first post. Exactly.

And how do you know if you have a good plan or not?
 
nunrgguy said:
An oft received piece of wisdom is to trade your plan and plan your trade. Do this with discipline and you cannot (or should not) fail.

Can anyone spot the problem with this?



(footnote: oops here we go again questioning received wisdom from above. I heartily expect many catty comments lolz)
Click to expand...

Markets change,methods (including well known ones) become obsolete and all trading systems fail sooner or later.The game plan will sooner or later become redundant, next plan is to trade on instincts,revenge trades and lost it all baby plan.

Thats y work on fully automated systems to cater for the black swan.
 
nunrgguy said:
Absolutely. No such thing as a perfect plan anyway, esp. in trading.

He had good tanks too.
Click to expand...


I think we're going up a cul de sac. Its impossible for any trading plan to achieve 100% win rates so that's not even a realistic objective.

But assuming that a near-perfect plan could be developed, what would be its characteristics?
 
oildaytrader said:
Markets change,methods (including well known ones) become obsolete and all trading systems fail sooner or later.The game plan will sooner or later become redundant, next plan is to trade on instincts,revenge trades and lost it all baby plan.
Click to expand...

Not true if you can trade price and know your market well.
 
nunrgguy said:
Hit the nail on the head on the first post. Exactly.

And how do you know if you have a good plan or not?
Click to expand...

Live trading, small size, real money. Scale up the size gradually as things become clear.

Always remember that not all swans are white.
 
oildaytrader said:
Markets change,methods (including well known ones) become obsolete and all trading systems fail sooner or later.The game plan will sooner or later become redundant, next plan is to trade on instincts,revenge trades and lost it all baby plan.

Thats y work on fully automated systems to cater for the black swan.
Click to expand...

Fully automated systems are the biggest victims of Black Swan events.
 
Starting small, scaling up...good, like that. That gives you some indication that what you are may turn a profit...for now.

Then, eventually you'll be trading full size.
Then what? Just 'trade the plan'?
 
On that same tack, part of my background is in industrial control systems and control theory...oildaytrader - any of these mechanical systems incorporate any kind of negative feedback?
 
nunrgguy said:
On that same tack, part of my background is in industrial control systems and control theory...oildaytrader - any of these mechanical systems incorporate any kind of negative feedback?
Click to expand...


They are safely devised to stop trading in exceptional volatility, with many cut out safety features.There are automated instructions to close everything out after so many points loss .There are no other negative feedbacks.
 
nunrgguy said:
Starting small, scaling up...good, like that. That gives you some indication that what you are may turn a profit...for now.

Then, eventually you'll be trading full size.
Then what? Just 'trade the plan'?
Click to expand...

More than likely not.

As an aside - I only trade US stocks, I can't comment on Forex, Futures etc.

The thing is, once you get going with real money, you tend to pay attention to the markets in general and get a better feel for them. Things happen that suprise/intrigue you and you learn more about those things and you will either incorporate or ignore them.

I think the best thing you can really do is to trade small size and understand that this is the start of the learning process, not the end of it.
 
oildaytrader said:
That depends on the quality of the automated system.Some systems just shut down automatically without much losses.
Click to expand...

I would disagree with that too.

How do you shut down a system that has open positions you can't get out of because of some unforeseen event ? What about if the market circuit breakers kick in and you can't get out ?

I know lots of people dream about automated systems but I think that the use of discretion, understanding the instruments you trade intimately and understanding what the drivers behind price moves (or non moves) are, then you will make much more money.

The problem is, most people think that learning this stuff is beyond them. For sure, you have to research and dig around, especially if you want to be rewarded from some of the more esoteric drivers of price move BUT this approach is going to make you money way faster than following the normal pure TA approach that a lot of people go for.

My prediction is that after a lot of time investment in automated systems, you'll give up and either give up on trading or eventually discover that price is not driven by technicals.
 
DionysusToast said:
More than likely not.

As an aside - I only trade US stocks, I can't comment on Forex, Futures etc.

The thing is, once you get going with real money, you tend to pay attention to the markets in general and get a better feel for them. Things happen that suprise/intrigue you and you learn more about those things and you will either incorporate or ignore them.

I think the best thing you can really do is to trade small size and understand that this is the start of the learning process, not the end of it.
Click to expand...

Spot on. And it's this feel that incorporates part of your feedback loop - the plan has to be dynamic and change as the market changes. The faster you can sense this the better and I think this is where the difficulty lies for most - is a trader's current difficulty just expected drawdown or has the market changed?
 
I think this 'changing market' concept comes from people that follow pure technicals and have a very short-term, blinkered view. They have a system that works for a while and when it doesn't, they say that the market changed.

Similarly, you can see in the news & the bookstores. News like "Buy and Hold is dead" because the markets went back to where they were 10 years ago. Then you see books released that focus on what made money last year - be it 'growth','value', 'crash profits' etc...

If you take a long term view, the markets don't change. There are of course some changes - like electronic trading, decimalisation but really, the markets regularly shift gear - pessimism, exuberance, indifference. Correllations change too - look at the dollar/equity relationship in the US right now. These changes will be constant and that is the way the market is.

Earnings season will soon be upon us - will it be the same as the last earnings season when you could have gone long every stock the day before the announcement and made money overall ? Maybe not. Does that mean you can't make money from the next earnings season ? Of course not.

People want a simple, repeatable pattern based on past history. It is the NOW that you have to make money, not yesterday, last week or last month.
 
DionysusToast said:
I would disagree with that too.

How do you shut down a system that has open positions you can't get out of because of some unforeseen event ? What about if the market circuit breakers kick in and you can't get out ?
I only trade most liquid and non manipulated markets


I know lots of people dream about automated systems but I think that the use of discretion, understanding the instruments you trade intimately and understanding what the drivers behind price moves (or non moves) are, then you will make much more money.

The problem is, most people think that learning this stuff is beyond them. For sure, you have to research and dig around, especially if you want to be rewarded from some of the more esoteric drivers of price move BUT this approach is going to make you money way faster than following the normal pure TA approach that a lot of people go for.

My prediction is that after a lot of time investment in automated systems, you'll give up and either give up on trading or eventually discover that price is not driven by technicals.

I don't trade on technicals, only on price quoted in liquid marketss
Click to expand...

Your comments apply to stocks and highly manipulated/controlled illiquid markets run by big bucketshops.

I won't give up , cause I can always buy insurance like OTM options, but won't.I also take risk and can live with drawdowns and losses.

O D T
 
nunrgguy said:
Spot on. And it's this feel that incorporates part of your feedback loop - the plan has to be dynamic and change as the market changes. The faster you can sense this the better and I think this is where the difficulty lies for most - is a trader's current difficulty just expected drawdown or has the market changed?
Click to expand...

Nailed it.I design dynamic automated systems.
 
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