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Trading Plan: A Roadmap To Trading The Markets

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Having a trading plan is similar to having a map when traveling to a new location. Modern day vehicles often come with a navigation system making it easier to travel with the fastest route. A trading plan acts as a roadmap for the trading day.


Most new traders trade without a plan. This often causes reckless trading, emotional trading, and no predefined entry and exit points. They are simply lost during the trading session. Designing a plan prior to the open is necessary. Most new traders are still unexperienced to devise an effective trading plan that can guide them throughout the day. They are unable to locate key support and resistance levels, do not hold strict money management rules, and lack the discipline needed in trading.


So What Is A Trading Plan?


Everyday after the close I will spend 1-2 hours studying the market action. I will then go through my daily charts, 233 TICK charts, and Market Profile charts. First thing I do is to look for market acceptance vs rejection. Then I switch to the daily chart to view the bigger trend. I will then plot the pivot points and any significant price level that I will be looking at accordingly. This gives me a roadmap for the markets.


The second step is to plot the route I plan to take on the roadmap. I will visualize a number of possible situations for the following trading day. Couple examples include:


1. If the markets open up above the value high pivot, I will look for long setups.

2. If the markets gap down to the daily pivot, I will fade it for a gap fill.

3. I will not trade between certain price levels as it offers no opportunity.


Every trader has their own methods and analysis techniques to develop a trading plan. There is no right or wrong way to devise one. The biggest mistake alot of traders make is that even with a plan, they are unable to follow it. Why draw a map and not use it?


Develop a trading plan and stick with it. Have the discipline to follow your plans. By having a plan and applying money management, you have a significant edge over a good percentage of traders. Best of trading.


James Lee

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I think your input is very valuable. If one intends to follow it seriously, it should be given respect and treated like a business.

Also,I would like to add that one should keep of record of all transactions both profits as well as losses.That done, it is also necessary to analyze the factors behind it which help in futher harnessing the profit as well as avoiding the pitfalls.

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If you don't track it, it didn't happen.

I find that writing in a trading journal and reading from it to do my daily analysis of success and failure is a great step towards treating this "game" as a business.

You can't keep much more than 7 active things in your mind at the same time, so use that expensive resource to work your plan, rather than trying to remember what you did.

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This is fantastic! I'm looking to do a similar thing next January as I start tracking my performance on the US Equity markets. I'm going to introduce it to the board when it's all set up but I read this in my e-mails this morning and just wanted to say thanks! Here's how I'm going to track my portfolio if you're interested

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