If the conventional wisdom is true, that most speculators, even those with access to good information, lose money, then what separates the few winners from the many losers? We believe the difference may be an honest trading plan. Having an honest trading plan does not guarantee success, but not having one almost guarantees the lack of it.
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This ebook-audio set has nothing to do with technical analysis and everything to do with becoming a successful trader. Identify your own cycle of negative thoughts, habits and routines and replace them with positive thoughts, habits and routines that will provide you with lifelong benefits.
The Power of Positive Habits
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What is an honest trading plan? An honest trading plan is more than going through the motions. It concedes your financial and emotional strengths and weaknesses and adjusts for them. An honest trading plan contains the minimum essential ingredients
when it is a written plan that answers all the following questions:
- What time frame will I trade in?
- What is the profit/loss profile of the instruments I am trading?
- What is my loss limit risk for any one trade? Will I pass on the 'sure thing' if it exceeds the risk limit?
- What objective standard do I use to measure risk before the trade?
- What objective events will trigger a trade entry?
- What objective events will trigger a stop-loss or profit-taking trade exit?
- Can my capital allocation per trade withstand five, six or seven losses in a row without getting kicked out of the game?
Even with all the essential ingredients, your trading plan isn't honest unless and until it is written, and followed. Remember, we're talking about being honest with yourself. Making money trading stocks or the indexes is not about trying to predict the future, or having the 'right' Elliott Wave count. It's about using all the knowledge and information available to identify a coincidence of pattern, price and time that has a reasonable chance of becoming a turning point, and when we observe that may have happened, taking action on an objective trigger.
An honest trading plan provides for losses by identifying the risk of a trade
before taking the position. For example, reversal bar trades on intraday charts usually have the least amount of dollar risk per position because the stops are so close to the entry, but the frequency of losses is higher. An honest trader understands this and will properly proportion the number of positions put on with an intraday reversal bar trade. An honest trader will not ignore the unusual risk of a deep out-of-the-money option series with an automatic 50% loss on the bid-ask spread.
An honest trader understands that markets don't always stop and reverse exactly at projected price and time targets. Nor do they always continue in the right direction even after reversing from a target zone. Losses are part of the cost of doing business and must be managed. A single loss must never become a disaster. And when the conditions calling for the original trade continue to exist at the next price and time target, the honest trader has the emotional capital to get back on the horse.
Guide to Writing a Trading Plan (ebook)