Trading Plan

[Brumby]

If you have been around a trading forum such as this, sooner or later you will hear the term trade plan or trading plan being mentioned. If it has not crossed your mind to ask, the question is "what is a trade plan?". If I were to venture to guess, it probably means different thing to different people. There are a number of questions that arise out of this including :

1)Do you consistently develop one before putting on a trade?
2)If you have one, what do you think are the components essential to one?
3)Do you always follow your trade plan? If not why not?
4)Do you always conduct a post trade analysis based on your plan?
5)Do you score how well you followed the plan?
6)Do you use your post trade analysis on your trade plans to improve your trading. If so, in what ways?
7)Do you have statistical analysis derived from your post trade analysis to determine your trading performance as part of your close loop trader development. If not, why not?
8)Do you regard having a trade plan as being necessary on evaluating your personal trading performance?
9)If your evaluation is pointing towards trade psychological issues rather than systems issue, how do you go about integrating behaviour modification into your trade plan? If not, why not? If yes, what program do you have?

Finally do you regard such typical statements as having a trade plan?
Sell EURUSD at $1.850
Set protective target @$1.870
Take profit @ $1.800

Would like to understand what others are doing out there in the trading universe.

 

[EnlightenedJoe]

Windbags usually can't trade. They'd make good trainers. They will go something like: different people following the same plan will have different results. The actual result is that nobody following the plan wins consistently enough to make their "trading" viable. But this does relieve the windbag of responsibility for causing people to lose.

The only plan one needs to succeed in the markets is to buy low sell high, and all the mechanisms necessary to serve that plan. The universally followed and preferred plan used by people are to buy high sell low. Their broker statements and their call outs prove this to be the case.

 

[itspossible]

^^^utter rubbish-give that clown a custard pie

 

[itspossible]

The only plan one needs to succeed in the markets is to have an out of control dax position that will eventually over the next billion years come good.if wrong you simply average down 20 times till your position comes back-thats how clowns trade innit-word up clowns-ps pip will believe me.

 

[mpups]

LOL ^^^ :cheesy:


mine is a document which fits on one page and contains things like:

reminders
my outlook on markets
my definitions of things
things to watch out for (mistakes made in the past etc)
criteria for entries
stop/limit distance and R/R (not set in stone)
other rules
risk limits

its my way of clarifying to myself (and revising) what i do

do you regard such typical statements as having a trade plan?
Sell EURUSD at $1.850
Set protective target @$1.870
Take profit @ $1.800

when someone says trading plan i think it normally means the overall one and entry/exit would be just a part of it. incidentally, it would need to include whether you leave till stop/limit is hit or a manual exit is "allowed"

 

[dbphoenix]

If you have been around a trading forum such as this, sooner or later you will hear the term trade plan or trading plan being mentioned. If it has not crossed your mind to ask, the question is "what is a trade plan?". If I were to venture to guess, it probably means different thing to different people.

*clip*

Would like to understand what others are doing out there in the trading universe.

I bring this up as much as anyone and more than most. I've explained how to develop one here, though I'm not the only one to provide guidance. Fact is that few people want to do it, so the opportunities to get into the nitty-gritty are few and far between.

 

[darktone]

If you have been around a trading forum such as this, sooner or later you will hear the term trade plan or trading plan being mentioned. If it has not crossed your mind to ask, the question is "what is a trade plan?". If I were to venture to guess, it probably means different thing to different people. There are a number of questions that arise out of this including :

1)Do you consistently develop one before putting on a trade?
2)If you have one, what do you think are the components essential to one?
3)Do you always follow your trade plan? If not why not?
4)Do you always conduct a post trade analysis based on your plan?
5)Do you score how well you followed the plan?
6)Do you use your post trade analysis on your trade plans to improve your trading. If so, in what ways?
7)Do you have statistical analysis derived from your post trade analysis to determine your trading performance as part of your close loop trader development. If not, why not?
8)Do you regard having a trade plan as being necessary on evaluating your personal trading performance?
9)If your evaluation is pointing towards trade psychological issues rather than systems issue, how do you go about integrating behaviour modification into your trade plan? If not, why not? If yes, what program do you have?

Finally do you regard such typical statements as having a trade plan?
Sell EURUSD at $1.850
Set protective target @$1.870
Take profit @ $1.800

Would like to understand what others are doing out there in the trading universe.

1)Do you consistently develop one before putting on a trade?
I always have a plan / framework before starting a trade.

2)If you have one, what do you think are the components essential to one?
Have an overall objective. Decide on a total and unit size and a method of managing it. Always know what your worst case is at XYZ price and time.

3)Do you always follow your trade plan? If not why not?
For the vast most part of the time. Im human.

4)Do you always conduct a post trade analysis based on your plan?
Yes. Win or lose.

5)Do you score how well you followed the plan?
I dont score it per say but I consider it.

6)Do you use your post trade analysis on your trade plans to improve your trading. If so, in what ways?
Yes. Mostly from a trade management point of view.

7)Do you have statistical analysis derived from your post trade analysis to determine your trading performance as part of your close loop trader development. If not, why not?
The only thing im really interested in these days is that I did better than my worst case MTM, and that I made good use of the prices offered whilst I was involved.
If im sitting there fully sized x days in and my realised + unrealised total more favorably than my worst case MTM, ive done my job.

8)Do you regard having a trade plan as being necessary on evaluating your personal trading performance?
Yes.

9)If your evaluation is pointing towards trade psychological issues rather than systems issue, how do you go about integrating behaviour modification into your trade plan? If not, why not? If yes, what program do you have?
Ive had the psych thing down for while now but sometimes 'life' can distract, Ill only stand aside if its major. Occasionally ill have a 'think I know something' wobble, its tough to totally unlearn all the BS youve picked up over the years. I write out my sig 50 times

Finally do you regard such typical statements as having a trade plan?
Sell EURUSD at $1.850
Set protective target @$1.870
Take profit @ $1.800
Id regard the above as part of a plan. Imho, not a great plan.

Cheers
D

 

[EnlightenedJoe]

I know I dont know shît!!

Don't be so modest. Everyone knows you know all about $6 wheat and 20k DAX. I will give you something else to add to your list soon.

 

[dbphoenix]

1)Do you consistently develop one before putting on a trade?
I always have a plan / framework before starting a trade.

2)If you have one, what do you think are the components essential to one?
Have an overall objective. Decide on a total and unit size and a method of managing it. Always know what your worst case is at XYZ price and time.

3)Do you always follow your trade plan? If not why not?
For the vast most part of the time. Im human.

4)Do you always conduct a post trade analysis based on your plan?
Yes. Win or lose.

5)Do you score how well you followed the plan?
I dont score it per say but I consider it.

6)Do you use your post trade analysis on your trade plans to improve your trading. If so, in what ways?
Yes. Mostly from a trade management point of view.

7)Do you have statistical analysis derived from your post trade analysis to determine your trading performance as part of your close loop trader development. If not, why not?
The only thing im really interested in these days is that I did better than my worst case MTM, and that I made good use of the prices offered whilst I was involved.
If im sitting there fully sized x days in and my realised + unrealised total more favorably than my worst case MTM, ive done my job.

8)Do you regard having a trade plan as being necessary on evaluating your personal trading performance?
Yes.

9)If your evaluation is pointing towards trade psychological issues rather than systems issue, how do you go about integrating behaviour modification into your trade plan? If not, why not? If yes, what program do you have?
Ive had the psych thing down for while now but sometimes 'life' can distract, Ill only stand aside its major. Occasionally ill have a 'think I know something' wobble, its tough to totally unlearn all the BS youve picked up over the years. I write out my sig 50 times

Finally do you regard such typical statements as having a trade plan?
Sell EURUSD at $1.850
Set protective target @$1.870
Take profit @ $1.800
Id regard the above as part of a plan. A bad plan.

Cheers
D

These are the kinds of replies that make this site worth visiting, or at least could make it worth visiting once again. Too bad there aren't more of them.

 

[Quantt]

1)Do you consistently develop one before putting on a trade?
Yes, I have written down set of precise rules.

2)If you have one, what do you think are the components essential to one?
3parts: algo to create watch list; algo to enter a trade; algo to monitor and exit

3)Do you always follow your trade plan? If not why not?
100%, that's why everything it is fully automated, to avoid mistakes

4)Do you always conduct a post trade analysis based on your plan?
Once a week I go trough all my trades to make sure everything is working as designed

5)Do you score how well you followed the plan?
No, because it is fully automated and followed 100% by design

6)Do you use your post trade analysis on your trade plans to improve your trading. If so, in what ways?
I am always on a lookout to improve, so I can get new ideas from past trades

7)Do you have statistical analysis derived from your post trade analysis to determine your trading performance as part of your close loop trader development. If not, why not?
Only if I am building/testing a new system

8)Do you regard having a trade plan as being necessary on evaluating your personal trading performance?
No plan = no trading for me, lost 5 figures until I got this simple equation right

9)If your evaluation is pointing towards trade psychological issues rather than systems issue, how do you go about integrating behaviour modification into your trade plan? If not, why not? If yes, what program do you have?
The major benefit of automation is that it take scare of all the psycho stuff...

Finally do you regard such typical statements as having a trade plan?
Sell EURUSD at $1.850
Set protective target @$1.870
Take profit @ $1.800
It is a good start, the problem for me is the defined profit, I am not trading forex, but in my trading system, I do not have price targets, I rather let my profits run as long as possible...

 

[mpups]

3)Do you always follow your trade plan? If not why not?
100%.....:cheesy:

hi quantt i just wondered what platform/software do you use for your robots? and do you need to leave your PC running? Auto does interest me but currently my entry is basically discretionary so not sure whether ill ever really drive an automatic. The nearest i get to automation is setting an order, stop and limit and letting it play out!

 

[Brumby]

Thank you to all who replied constructively. Those who are trolling, like a bad trade I cut my losses and just put you on my ignore list. Clean and simple.

I will be posting a reply on the subject matter but before I do that I would like to post an image as a thumbnail as part of the conversation but I am not sure how to do that. I need some help on what buttons to use. Thanks.

 

[dbphoenix]

Thank you to all who replied constructively. Those who are trolling, like a bad trade I cut my losses and just put you on my ignore list. Clean and simple.

I will be posting a reply on the subject matter but before I do that I would like to post an image as a thumbnail as part of the conversation but I am not sure how to do that. I need some help on what buttons to use. Thanks.

When you get ready to post, scroll down to Additional Options, Attach Files, Manage Attachments. Click that and you'll get a popup window that asks where you want to upload from, e.g., your computer. When you've made your choice, click Upload and your image will appear as a thumbnail when you Submit Reply.

 

[Brumby]

Personally I don't have a formal broad scope trading plan but I do have one for each trade I take. In my view, a trade plan is the most important tool that we can have as traders. My aim is to go in depth into areas of mutual interest where trade plans are used to enhance trade performance and also areas of difficulties.

A trade plan is generally tied to our individual trading process be it systemic or discretionary but essentially it covers our trade selection, execution and open management. In the past, I have struggled to score my individual trade plan as part of my post trade analysis. Although I am generally aware where I did not perform well in the process, not being able to score each trade plan objectively means I was missing a meaningful piece of data in my overall macro assessment.

Recently I was watching a training video by Steve Ward (a performance trading coach) and I came across a concept on how to score a trade plan in a simple, objective and meaningful manner. Typically our post trade analysis tends to focus on why we made or loose money on a trade I.e. an outcome focus approach. We may know what our win rate is or our RR rate but it doesn't tell us the quality of that outcome. The decision quality metrics concept help us to understand how we got to that outcome. By understanding "how we got there” helps us to quantify the quality of our trade results. Without realistically addressing the qualitative nature of our trading process it would not be possible to work on improving our trade performance.

So how does this metrics work? If you follow the trade process and win that is a score of 1. If we follow the trade process but loose that is a score of 2. Ideally provided our trading process is buttoned down and we trade the plan, our score should either be 1's and 2's. In other words, either the market is cooperating or it is not. However if our wins are all 3's then we know we are trading on borrowed time and luck is simply on our side. In other case's, if we have increasing 3's and 4's we know our trading is getting sloppy and our trading process needs work.

With that I would like to take an example that I used earlier on the EURUSD trade to extend this conversation further.
I posed the question earlier whether the following was a good trade plan

Sell EURUSD at $1.850
Set protective target @$1.870
Take profit @ $1.800

Generally my take away from your comments are you view the plan as incomplete. I would agree with your assessment.
My main problem with the example is that the information is basically a trade execution plan and lack the information that precedes the execution and that is the trade selection process. The most basic information needed for a trade set up in the selection is to define the reason for the trade. In essence, why short the EURUSD? Why not reverse the trade and buy EURUSD instead at $1.850 or stay neutral entirely? Say if you actually executed the plan, and is a win is the trade simply a flipping of a coin i.e. merely good luck? How do you differentiate the trade between random chance and skills? If you have an edge, over many runs you will theoretically generate positive expectancy, but until then ….?

In my view, the most important ingredient in a trade plan is to define the reason for the trade. If you have none, then it is simply a betting call. I recently heard a short video which discussed the reason for taking a FX trade and I think is instructive and universal. It needs to at least meet one of the three criteria :
1)Did something break?;
2)Did something changed?; or
3)Did something fundamentally happened?

My question is do you always have a reason identified for the trade in determining your trade set up? If you do, I would be interested in understanding the thought process you use leading to your trade selection decision. Do you document your thought process into your trade plan?

 

[barjon]

.......My question is do you always have a reason identified for the trade in determining your trade set up? If you do, I would be interested in understanding the thought process you use leading to your trade selection decision. Do you document your thought process into your trade plan?.........

If you don't have a reason you're probably relying on luck or very clever money management, so it's probably better to have it identified.

I think a trading plan should describe your overall strategy from which all else stems. This is fairly easy when it's a specific piece of price action (see attached), less so when you have a broader canvass towards the "wherever the price action leads me" end. Even then where you are going to find your trading opportunities should be described as best you can in order that you are absolutely clear as to what you're up to.

The plan goes on describe the specific tactics of the trades in order that you always know what you are doing and when. This avoids too much thinking about it at the time which often results in missed opportunity. All imo, of course

 

[Quantt]

hi quantt i just wondered what platform/software do you use for your robots? and do you need to leave your PC running? Auto does interest me but currently my entry is basically discretionary so not sure whether ill ever really drive an automatic. The nearest i get to automation is setting an order, stop and limit and letting it play out!

Hi Kaeso, first let me state I am very paranoid when it comes to computer systems ( occupational hazard - leading a team in the security/systems space), so I would not trust and put my trading system into off the shelf trading providers, most of them are startup (loosing money) companies with hedge funds as primary investors, so even though they state that they do not look into their clients trading systems, there is no verification system, audited by 3rd party, so it takes only one disgruntled employee to get your winning system exposed... not to mention hackers, as Google said in a statement, there are only 2 types of companies: those that were hacked and those that don't know it yet... If one day I decide to move to the dark side, those would be my primary targets and would be much easier to get hacked that a multi billion hedge fund for example and this would be the perfect crime, just copy the winning systems - e.g. nothing to steal or to ransom...

What I am using is the god old python (+ APIs) - had to learn it, which was a bummer, since I am not a developer, but if I can do it (being as lazy, as I am), every one can and lets face it computer programing is the 21st century literacy, so everyone should know how to do it and I am sure you'll find portions of your trading you can automate, like stock screeners, alerts, position sizing, etc.

I am running everything on redundant servers "in the cloud", so I don't have to to even have internet connection, which is great when I go to my favorite spots in Cuba or travel in Europe, even when I go fishing around the corner, the feeling is great, when I get notifications on my phone about trades making money...

That's why I am advocating the next logical step after having a systematic trading plan - AUTOMATE and you'll make your life much easier and enjoyable and you can do that until you are either dead or senile and the good part is you can train and live it to your children after...

Hope this helps...

 

[Quantt]

My question is do you always have a reason identified for the trade in determining your trade set up? If you do, I would be interested in understanding the thought process you use leading to your trade selection decision. Do you document your thought process into your trade plan?

Yes, absolutely, the core of my system is based on the a fundamental observation I have made + years and years of back testing data to prove it (covering few market cycles) and I am confident it will work as long as people are trading the market, e.g. everything is based on psychology: fear and greed...

One day if we have AI system - and I am not talking about the current rule based and other systems programed my real people, but a real AI driven and build trading system, it might not work anymore or who knows, maybe the AI would be as greedy and fearful as us humans, (which will not be a good thing for the humanity, but this is another topic for discussion)...

So maybe I'll know when the singularity occurred, based on my trading system stop working

 

[mpups]

Hi Kaeso, first let me state I am very paranoid when it comes to computer systems ( occupational hazard - leading a team in the security/systems space), so I would not trust and put my trading system into off the shelf trading providers, most of them are startup (loosing money) companies with hedge funds as primary investors, so even though they state that they do not look into their clients trading systems, there is no verification system, audited by 3rd party, so it takes only one disgruntled employee to get your winning system exposed... not to mention hackers, as Google said in a statement, there are only 2 types of companies: those that were hacked and those that don't know it yet... If one day I decide to move to the dark side, those would be my primary targets and would be much easier to get hacked that a multi billion hedge fund for example and this would be the perfect crime, just copy the winning systems - e.g. nothing to steal or to ransom...

What I am using is the god old python (+ APIs) - had to learn it, which was a bummer, since I am not a developer, but if I can do it (being as lazy, as I am), every one can and lets face it computer programing is the 21st century literacy, so everyone should know how to do it and I am sure you'll find portions of your trading you can automate, like stock screeners, alerts, position sizing, etc.

I am running everything on redundant servers "in the cloud", so I don't have to to even have internet connection, which is great when I go to my favorite spots in Cuba or travel in Europe, even when I go fishing around the corner, the feeling is great, when I get notifications on my phone about trades making money...

That's why I am advocating the next logical step after having a systematic trading plan - AUTOMATE and you'll make your life much easier and enjoyable and you can do that until you are either dead or senile and the good part is you can train and live it to your children after...

Hope this helps...

oh i see this sounds great - you are living the dream! its interesting to learn about your setup thanks. if i find something i can to automate ill look into it but i want to continue what im doing for now and keep developing.

 

[Quantt]

oh i see this sounds great - you are living the dream! its interesting to learn about your setup thanks. if i find something i can to automate ill look into it but i want to continue what im doing for now and keep developing.

Not yet, but in a few years when the kids are out of the house, the house is sold and I am on my dream boat sailing the world, then we can say I am living the dream... Cheers!

 

[Brumby]

Yes, absolutely, the core of my system is based on the a fundamental observation I have made + years and years of back testing data to prove it (covering few market cycles) and I am confident it will work as long as people are trading the market, e.g. everything is based on psychology: fear and greed...

Back in 2005, I paid $5000 for a mechanical system that basically trades fear and greed as measured by extended RSI readings. The whole mechanical system was based on more than 10 years of research data. Essentially the money was for the research data on the universe of US SP500 and Nasdaq stocks. I traded it briefly and abandoned it primarily because it requires no protective stop for it to deliver the expected results and also the trading hours were just in conflict with mine in Australia. The premise of the system was for a reversion to mean. Although the research period and population size was extensive, I don't think it caters for a black swan event. No research data ever does.