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DbPhoenix

Developing a Plan: The Trading Journal

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The Trading Journal

 

If you don't make money off of it, it had better be either a religious experience or a hobby.

 

-- Lance Cooper

 

 

In order to succeed at trading, you must have an edge. Your edge begins with the knowledge you gain through your research and testing that a particular market behavior offers a level of predictability that provides a consistently profitable outcome over time. Without it, one is just "playing" the market in order to have something to talk about on message boards. To get it, you have to know exactly what you're looking for and what to do with it once you've found it. This process is what the journal is all about.

 

The journal goes through several stages depending on where you are. Once you've decided where you want to concentrate your efforts (at this level, the journal may resemble a diary), then you begin the process of developing a system (or method, strategy, procedure, whatever you want to call it). Here the journal takes on a different character. Once you've developed a tentative/preliminary system, you begin testing/trading it, and the journal adopts a still different character.

 

The first step is to decide what kind of trader you want to be.

 

  • What do you want to accomplish with your trading? Is it recreational? Supplementary income? A part-time job? Do you want to make a living at it? Even the greenest of the green knows whether or not he wants to make a living at it, trade only part time, trade for recreation, trade for the action, trade to have something to talk about with other traders (for whatever reason), trade only long enough to earn money to do or buy X.

 

  • Do you have any idea what sort of trading is most comfortable? Long or intermediate-term trading? Short-term trading? Day-trading? Trend-trading? Scalping? (Note here that a short-term trader, for example, does not become a long-term trader just because his stop was hit and he didn't sell; a long-term trader doesn't become a short-term trader because he chickened out and sold too soon. Each of these approaches are selected deliberately and for thoroughly-considered reasons.) How patient are you? How adventurous? Are you a leader or a follower (most people think they're leaders)?

The second step is to decide what you're going to trade and when you're going to trade it.

 

  • Have you found an instrument -- futures, stocks, ETFs, bonds, options -- that provides you with the range and volatility you require but also the safety that enables you to relax and trade in an objective and rational manner?

 

  • Have you yet found a time (5m, hourly, daily) interval that gives you enough trading opportunities but also gives you enough time to think about what you're doing? If you want to limit your trading to the "morning", are you physically and psychologically prepared to trade all day? If not, can you shrug off whatever opportunities you may miss by limiting the amount of time you spend trading?

The third step is to develop your system.

 

(For the rest, see the pdf below)

Developing A Plan2015.pdf

Edited by DbPhoenix

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