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Trading Plan By TrendFollower

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@elle,

Thanks.¬†ūüĎć

Those who do not have a plan will convince themselves and try to convince others that there is no point in having a trading plan. This for me can only lead to losses and being an unsuccessful trader. 

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Your trading plan should include which signals and indicators you are going to use. This can change of course where you may add certain indicators later or remove certain indicators but they should be listed in your trading plan. 

I like volume, moving averages, relative strength index (RSI), momentum and the parabolic SAR. 

I like identifying breakouts as early as possible via monitoring price action and then seeing if they manifest into trends. Once they do then I want to try and establish which are the strongest trending. This is an important part of my trading strategy. I want to try and trade the strongest trending assets to give me the best possible chance of success or to try and increase my chances of success. If I look at a chart this cannot demonstrated to me then I will not trade that asset. I do not have a trading system which means that I have to trade on a given day, week or month. I have the advantage of only executing a trade when to me it is evident that the asset is one of the strongest trending assets available at a given time to trade which meets certain parameters and requirements. 

If you were going into a boxing match with an elite boxer then part of your preparation would include fitness, training, boxing technique, power, etc. Part of it would also include looking at the strengths and weaknesses of your opponent. Without proper preparation you would have a clear disadvantage in the boxing match as the opponent is an elite boxer. This is why in my opinion you need a trading plan when trading as this is the 'preparation' part of going into battle with the market. 

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When one makes a plan they are thinking about what they want to do in the future.

So a trading plan should articulate what a trader wants to achieve in the future. It should clearly highlight what they intend to do to ensure they achieve what they want to. 

A trading plan will have to include decisions (right or wrong) as it cannot be wishy-washy. The trader must decide upon its trading methodology and the trading plan should clearly show this.

 

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Trading Size and Risk Management are two important factors to consider and include in your trading plan. When you combine the two you should be in a position to allocate the right amount of capital to your trades based on the level of risk you wish to take. This sounds easy but can be tricky. 

The one thing you will read is to never put all your capital on one trade. I agree but I also think that if you have a very strong conviction on one of the strongest trending assets which you have identified as early as possible then to maximise your returns you may decide to allocate more capital on that particular trade compared to other trades. I do not think there is anything wrong in that but different text books will have different ideas on this. This is where your risk tolerance and mindset comes in.

This needs to be articulated in your trading plan in some manner so that it is clear how you will allocate capital to each trade and what the rationale will be. Without this how can one determine trade size on positions we wish to trade?

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Your trading plan should include something different than what everyone else is doing. That uniqueness which gives you an edge over other traders.

I would like to take this opportunity to quote Sir John Templeton (below):

If you want to have a better performance than the crowd, you must do things differently from the crowd.

The trading plan does not need to be complex. In fact the simpler the better. Articulate things in 'Simple', 'Plain' and 'Clear' English. 

As Warren Buffett once said:

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.

 

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@Trevbeats,

You asked how much capital you need to start with? This all depends on your aims and objectives. This should be in your trading plan.

Also you must not use any capital for trading that you cannot afford to lose. 

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On 14/10/2019 at 20:49, TrendFollower said:

Your trading plan should include something different than what everyone else is doing. That uniqueness which gives you an edge over other traders.

I would like to take this opportunity to quote Sir John Templeton (below):

If you want to have a better performance than the crowd, you must do things differently from the crowd.

The trading plan does not need to be complex. In fact the simpler the better. Articulate things in 'Simple', 'Plain' and 'Clear' English. 

As Warren Buffett once said:

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.

 

Very good, But now my real problem is esma rule will be going to the ozzi soon. I have been studying this for a great deal of time and nearly ready to pull the trigger.. But the retail trader is getting squashed again!!! How can you trade with thses stupid margins. Can I ask  do you trade , and if so what [account country]  do you use?

 

Trev  

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One should treat trading like a business. In any successful business there would be a business plan. So for any successful trader there must be a trading plan. 

There is a cheesy line but very true which is something like - failing to plan is a plan to fail. 

Some of the best and most successful traders in the world will have and are more likely to have a trading plan. I would be surprised if they do not. 

This trading plan can be an evolving plan which can be changed and adapted as situations change, knowledge improves, experience is gained, etc. 

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An important articulation that one should consider making in their trading plan is which assets they are going to trade and more specifically why?

A lot of traders miss out on some excellent trading opportunities because they only stick to one or two 'well known' assets whilst the big gains and larger profit potentials are missed on assets which they are not considering. If the reason is that they do not understand those assets then there is nothing stopping them from researching that asset to increase their understanding. 

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It would be interesting to know how many traders who are a client of IG have a trading plan? If around 70% of retail investors lose money then I would not be surprised if around 70% do not have a trading plan.

Having a trading plan does not necessarily mean that you will be unsuccessful or you cannot make profits but the chances of this happening are far lower. 

IG should conduct research on their clients and establish a correlation between those who have a trading plan and those who do not and how they perform. 

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When creating a trading plan - being honest is crucial. If you cannot be honest to yourself then it may skew your trading plan and this can have a domino effect on your overall trading. 

Assessing your risk tolerance, starting capital, goals, etc. is very important. If this is not done then again your trading plan may not be a very accurate reflection of what you are trying to achieve. 

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When the question is asked to a trader of what they trade and why, some of the answers provided are like this market has greater liquidity, it is more established, etc. When asked how this will help them to make the profits which are stated in their aims and goals in their trading plan, the silence can be deafening!

One must be able to articulate how any asset they trade can 'realistically' help to achieve the aims and goals articulated in their trading plan. 

So for example if a trader has an aim to make 300% per annum trading only Natural Gas but they are not going to 'short' Natural Gas then it becomes an unrealistic goal. Now this is just an example but I hope the point I am trying to make is understood. If someone has a target of £10,000 per month from trading but are only trading a specific FC pair using £1,000 then this is highly unlikely compared to someone who is trading £100,000 on a specific FX pair. Even then it is extremely tough but hopefully you get the point I am trying to make. 

You must have realistic trading aims and realistic trading goals. Without this your plan is not realistically achievable so offers very little assistance to a trader. 

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How does your trading plan combat or deal with volatility? This is something that traders must consider. Volatility can be embraced but that is if your trading strategy requires or demands it.

If it does not then what is included in your trading plan to ensure your risk management is robust enough to cope with unexpected or expected volatility?

 

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Your trading plan should clearly articulate what assets you are looking to trade and more specifically the reasons why?

If you have a trading plan which includes this (which you adapt and amend over time) then you should never need to ask the question what you should be trading as it should be clear what you are going to trade and why in your trading plan.

I tend to stick to Commodities, Cryptocurrencies, Bonds and Indices. I will occasionally trade shares which I think are trending strongly but I tend not to trade FX. This is documented in my trading plan. If I ever decided to trade FX (which is not likely at the moment) then I would have to amend my trading plan to reflect this. I would need to clearly articulate and justify why I had decided to trade FX.

If you cannot articulate clear reasoning behind which assets you are trading and why they are better than others assets based on your trading strategy then it may be a clue that you should not either be trading them or are not currently ready to trade them. Your trading plan should clearly detail the advantages that trading certain assets give you over others. If you cannot detail these then you really should consider your overall trading plan and work on it before commencing any further trading. 

If I cannot find strong trending assets then I am more than happy to wait and sit on the sidelines rather than trade for the sake of trading. This is one of the biggest reasons why traders lose money because they feel the need to constantly trade even if those assets are not trending strongly in a certain direction.

Patience is a skill that is crucial in trading. Those who do not have the patience to wait for strong trending assets will end up trading the wrong assets at the wrong time more often than those who do have patience. Don't get me wrong you can have patience and still be on the wrong side of a trade and make a loss if your trading decision proves to be incorrect. This has happened to me many times and then it becomes a case of trying to make sure that your loss does not get bigger and bigger and that you exit that trade once the price action has proved and confirmed that your trade was wrong. This happens to all of us. The only way you can reduce the amount of wrong trades you make is if you select your trades wisely. My style and strategy is to try and identify the strongest trending assets at any given time. 

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New Years Resolution for 2020:

For those who do not have a trading plan maybe the start of the year in 2020 is a great opportunity to actually spend the time and effort to devise one. 

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@mrken1,

I know you sent me a message as you could not find this thread. I have copied you so that it is easier for you to access this thread. 

 

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