Just A Journal

Section 15 - Trade The Plan

When I ask traders if they have a trading plan I tend to get two answers. Either they don't, or they do but, upon examination, they have one that isn't fit for purpose. The reasons it isn't fit for purpose will hopefully become clear as this post progresses.

I think there is a general reticence around writing a trading plan. It either feels too difficult or quite pointless. Based upon the majority of plans I see, I can completely understand why those conclusions are reached. What is invariably written is a one-time document that will be printed out to gather dust on a shelf or stored away on a computer to be rarely, if ever, looked at again.

What I hope to set out here is a different way to approach a trading plan. A way that ensures the trader ends up with a living, breathing document that gives up to the moment useful information. A trading plan should never be a 'once and done' affair. It should evolve as the trader evolves and it should document and reflect the journey the trader has taken to date (and where they want to head in the future).

The trading plan outline I'm going to set out has 7 sections. Some sections will be more interactive than others but all 7 will be fluid. They will change as the trader develops. Bear in mind this is purely my opinion around what an effective trading plan should look like. Traders might have their own ideas about what should be included and how it should be structured. The key thing is to end up with a plan that serves the required purposes.

OK - let's dive straight in.

Part 1. Pledge & Principles

This section deals with the fundamental commitment a trader makes to their trading and to their plan. It will likely include a pledge to always seek to trade in accordance with their plan, to keep their plan updated, to carry out a weekly review of their trades and results.

It will also likely include a pledge to stick to the 'golden rules' as defined by the trader. That might be that they will commit to taking the setups when they present themselves, without fear or hesitation. That they will take a loss when the market proves them wrong, again without fear or hesitation.

The list here will likely end up quite long. The trader should seek to capture all those fundamental do's and do not's that will form the backbone of how and why they trade.

Part 2. Traded Setups

Next we come to the section that most people think a trading plan should include. The problem is, they end up writing a plan that only contains this section.

In this part, the trader should capture, in great detail, what will get them into a trade, what will get them out of a trade, what their risk management profile is, what their money management strategy is, what hours/days they will trade, what timeframes they will trade etc etc.

Part 3. Weekly Profit Factor (and Win Rate)

Trading is a results orientated pursuit, of course.

A straightforward way to keep track of progress is to capture each trade taken and the outcome, in order that end of the week analysis can be done. Profit Factor is simply the total monetary winnings divided by the total monetary losses. So, if a trader has winnings of £6000 and losses of £2000 their Profit Factor is 3.0.

It's also helpful to capture the weekly win rate and the total trades taken for future analysis. Having the dedication to record and update this information on a weekly basis will provide invaluable statistics and a clear indication of progress or lack of.

This section hopefully demonstrates what I mean by turning your trading plan into a living document rather than something you write once and forget about.

Part 4. Trading Journal

The most important section of any trading plan, in my opinion.

This is where the trader records details of every trade taken. What got them into the trade, how they felt during the trade and what got them out. The amount of profit or loss (which will, at the end of the week, feed into the Weekly Profit Factor section of the trading plan).

How a trader feels during a trade might seem like a strange thing to record at first. But remember what I've written on trading psychology in the past. Emotions drive behaviours. If we can isolate the emotions that lead us to make poor decisions, we can work on changing and improving.

Part 5. Mentoring Notes/Tasks

If a trader is fortunate enough to have access to a mentor, this is where the outcomes of the sessions should be recorded. It should include a general overview of the discussions and specific goals or tasks as a result of those discussions. The tasks will then be carried forward to Section 6 (Development Pending).

If a trader doesn't have access to a mentor, consider finding one would be my advice. Even if you can't find an experienced consistently profitable trader to fulfill the role, try to find someone whose opinion you respect. Even if they can't provide a full mentoring service, they can at least keep you accountable.

If no other options are available, even a spouse/partner/friend can act as a surrogate.

Part 6. Personal Development (Pending)

This is the section that all other sections feed into and should be one of the most interactive sections of your plan. Anything that is yet to be tackled, or is work in progress, goes in here. This part will only be as useful as the trader chooses to make it. Paying lip service to it will render it useless.

Part 7. Personal Development (Completed)

This is the section a trader will transfer their development tasks to when completed. Together with Section 3, it will serve as a record of a trader's journey.

So, there we have it, my suggestion for what a trading plan should look like. I'm sure you all have your own opinions about what should or shouldn't be included but I've hopefully set out a version that includes the elements required to make the trading plan a tool that will have continued relevance and usefulness.

I understand many will read this post and decide it's all too much effort. And that's fine. But, for those who want to invest in their futures and aim to become consistently profitable traders, I highly encourage this approach or one like it.

As ever, if you have any comments or questions, please direct them over to my main thread at:
https://www.forexfactory.com/thread/...o-read-markets

Section 16 - Advanced/Aggressive Entries

As it's now around 7 months since I first introduced Roadmap, I think it's time to share something that will improve your edge.

Right at the beginning, and ever since, I've maintained that SMA200 should provide your bias and you should therefore only be looking for longs above SMA200 and shorts below it.

However, there is a more advanced/aggressive way to enter, which I think you're now ready to learn.

I can't stress enough though, this is not something I recommend for those new to Roadmap. Get the basics right first, then think about these types of entries. Even experienced traders might decide they are too aggressive and stick with the original plan. That's fine. This is all about giving you an additional option to use, if you wish.

You might have noticed during your chart analysis that trends sometimes begin BEFORE price reaches the 'correct' side of SMA200. Well, now you can take advantage of that. This isn't me saying you can take any old entry at any time. You must still have a solid reason for getting into the trade. But, if you feel you're at the stage where a little freedom will help you, you can have it.

At your disposal you have various tools within Roadmap. If you decide to no longer take your bias from SMA200, make good use of the other tools to guide you. Use trendlines, be aware of price in relation to channel etc etc. And, of course, I'm not suggesting you remove SMA200 from your chart. It's still on mine and likely always will be. You can still use the 8EMA channel to provide you with channel failures or channel crosses. But you now have the option of entering earlier.

With these more aggressive entries comes theoretically extra risk that you will try to enter a trend too early. You must embrace that if you want to trade this way (you must embrace risk if you want to trade - full stop). The rewards, when comparing your potential new entry points with your old entry points, can be significant.

Below I've added two charts to demonstrate entering on a trendline break instead of waiting for SMA200 to be broken. As you can see from the charts, if used correctly, this can increase your edge to a great degree.

As always, please direct any questions or comments to my main thread at:
https://www.forexfactory.com/thread/...o-read-markets

Section 17 - Trading Reversals

It's been a while!

In addition to Roadmap, I've discovered a framework that is useful for identifying potential reversal points. I'm happy to share this with you today.

The idea came about when I noticed that, rather than the standard 61.8 Fib retracement, the 70 level offered a high probability turning point. However, I wasn't a fan of drawing lots of Fib retracements on my charts.

I was aware of the existence of Fibo Bands and wondered if applying that logic to them would yield promising results. It turns out that, with the right settings, a very good degree of accuracy can be obtained.

The basic principle is simple. When price approaches the 0.7 level, the chance of a reversal (or at least a significant reaction) occurs. The best part is that the framework can be applied to any instrument on any timeframe. It can either be used as a take profit area for your trades or, if you are an aggressive trader, as an entry point.

Below I've attached the indicator, together with the relevant settings and some charts demonstrating the band in action.

I hope you find this useful and profitable.

Section 18 - Find Your Trading Personality

One thing I say over and over to traders who have yet to reach consistent profitability is that there is no perfect strategy. What works for one person might be disastrous for another. There are various reasons why this is the case, but let's focus on a single area for now. Trader personality.

If a trader is attempting to trade a strategy that contrasts with their personality, it will rarely end in success.

A good way to begin to establish what might work for you is to start with a blank sheet of paper and write down the individual elements which will make up your ideal trading strategy. Not the overall strategy itself, but the nature of the strategy. For example:

Checking charts twice per day, no more than 3 indicators, no moving averages or oscillators, in and out of positions within 2 days, easy to establish a bias, give trades wiggle room etc etc.

The more detail you can add to the nature of your dream strategy, the better. After that, it's simply a case of designing the strategy from scratch in accordance with your preferences.

You can also take one of the multitude of trader personality quizzes out there. Some are better than others, of course. But try to take a selection of them as each one will assist you in getting closer to understanding what motivates and interests you. Some for you to consider are Tharp Trader Test, MarketPsych Trader Personality Test, Daily FX DNA Quiz or Brett Steenbarger's Three Dimensions Trader Personality Quiz.

Most new traders come at this backwards. They search for a strategy before taking time to understand who they are and how they want to trade. But it's never too late to take a new path.

One element of being a consistently profitable trader is managing emotions. This can actually be assisted by matching up your personality with your trading style. If there is no friction between the two, the emotional pains you feel will be greatly reduced.

Any questions or comments can be posted on my main thread at: https://www.forexfactory.com/thread/...o-read-markets

Section 19 - Seeing The Light

It's been an interesting experience, releasing a further strategy on Forex Factory (https://www.forexfactory.com/thread/...ading-strategy).

I had perhaps forgotten what the early stages of a thread were like. But anyway, here we are. I wanted to take a little time to highlight what I hoped would already be apparent, but maybe it isn't.

Let's start with the following 3 charts. Which, if any, should you have been looking to trade?




If your answer was example 1 and possibly example 3, you are correct. Example 2 is a definite candidate for avoidance.

So what's the point of that little exercise? Well, it's hopefully to point out in pictorial form what I'm about to say in words.

Daylight is no different to any other strategy in terms of user discretion being required. I hope I've never given the impression that anything I suggest can be blindly traded. It cannot. If, as in example 2 above, there is no direction, Daylight will perform abysmally.

In the charts, you'll notice I added a colour-coded Smoothed 100 moving average. It's green when pointing up, red when pointing down. This is merely a helper if you cannot tell visually whether a market is trending or ranging. Daylight needs trends to flourish. I make no secret of that. Your job, as a trader, is to find the markets which are displaying suitable conditions. The strategy won't do that work for you.

Let's look at AUDUSD from earlier this week:




Should you be trading that market based upon what you're seeing unfolding? The answer is hopefully a firm 'NO'. You might get caught out once trying a long but it quickly becomes obvious the market is going nowhere.

Same market, a day earlier:




Looks very different, right? This looks like something we can trade profitably to the upside.

The point of these examples is that you need to train your eyes to spot favourable or unfavourable market conditions. Nothing is certain, of course. You can find the perfect conditions and the trade can fail. But what we aim to do is to stack probabilities in our favour. We look for conditions where we have established that, more often than not, a certain outcome will follow.

Please direct any comments or queries to the main thread: https://www.forexfactory.com/thread/...ading-strategy

Section 20 - Mentoring and Funded Accounts

Today, another of my students achieved funded trader status. I'm obviously very proud of the trader for achieving this and it also allowed me a moment to reflect upon the 15 months that have passed since joining Forex Factory.

Back in April 2020, I jumped onboard the FF train after having been a lurker for many years. I had reached a stage in my trading career where I wanted something more. Making a living from something you love doing is wonderful, of course, but occasionally (especially after many years of doing it) it starts to feel like a repetitive grind.

I wasn't too sure exactly what I wanted. I had a vague idea of presenting one of my trading strategies (Roadmap) and maybe starting a trading group where I could work on helping a small group of individuals to achieve what they desired. And so, I started my first thread and created a Slack group. The response was certainly more than I ever imagined and I quickly realised I had to limit the numbers of this trading group to ensure I was able to devote enough time to each person and, frankly, to avoid working myself into an early grave!

One thing about myself that I haven't shared on FF, until now, is that my health is not the best. Some days I'm fine and I can trade marathon sessions. It's not uncommon for me to be at my trading desk for 12+ hours. Other days, my health lets me down and I have to rest more. With that in mind, I really wasn't sure whether I was being unrealistic in my aims of developing other traders but I persevered.

I have to say, although it's sometimes hard work, the process of helping others to progress has been thoroughly rewarding. I had to make a difficult decision recently and cease supporting the larger numbers we had on Slack. Some members were more active than others so I decided to take the most active people and create a new home in Discord, with all the advantages that platform offers. What was also gratifying about the active members was that most of them were the 'originals', who had been with me since the beginning. Being able to watch them grow and progress is an absolute pleasure.

Anyway, fast forward to today and I now proudly see these individuals all making progress in their own way. Some are trading funded accounts, some their own money. Some are close to where they want to be, others still on the journey. Most are profitable and I had a trader who just reached the milestone of 10 profitable weeks in a row. Some trade Roadmap, some trade Daylight and others trade their own devised strategies. But what all of them have in common is perseverance and loyalty. For those reasons, I'll continue to give everything I can to assist them in getting exactly where they want to.

Which leads me onto funded accounts. I originally was against the concept, seeing it as another way for organisations to fleece under-capitalised traders who had a dream. Of course, prop firms do profit from failed challenges. However, I've come to see that my view was short-sighted and was coloured by my own fortunate position of having sufficient trading capital. For those who don't, I now recognise this is perhaps the only way they will, in relatively short time, be able to trade the size of account that can deliver meaningful consistent income.

Now for the disclaimer, as I know some on FF can be cynical when someone tries to help others, wondering what the ulterior motive is and whether it involves making money from other traders. This post is a genuine reflection upon my time in FF and also a celebration of, and a dedication to, the individuals I work with on a daily basis.

Everything I have provided has been free of charge. I am not seeking new students and I am not setting myself up as a service to help traders achieve funded status.

Let's see what the next 15 months has planned for me

Section 21 - Resources for Traders (Guest Post)

Something a little different now. I was asked if I could provide details of some resources for traders and I scribbled a note to aim to sit down and collate what I find useful. Then I had a bright idea - delegate!

I deliberately chose someone I mentor to provide the list below. He takes his performance and his psychology very seriously so I knew readers would be in safe hands with his recommendations.

Here they are:


Books

- All the 'Market Wizards' by Jack Schwager
- Trading in the Zone by Mark Douglas
- Reminiscences of a Stock Operator by Edwin Lefevre
- Market Mind Games by Denise Schull
- Thinking in Bets by Annie Duke
- The Daily Trading Coach by Brett Steenbarger
- Trading for a Living by Alex Elder
- Thinking Fast and Slow by Daniel Kahnman

Podcasts
-The chat with traders podcast

There are so many traders, trading psychologists, money managers and more on this podcast that its too long to list the individual episodes, I would say I've listened to over 100 hours of this podcast.

Youtube
- Patrick Boyle on Finance

Much more of a fundamental grasp of markets how they operate from a former hedge fund manager and lecturer in Kings College London. Covers derivative markets, corporate finance, applied portfolio management, options etc. Admittedly not necessary for day trading but good to have.

- Trader Dante

Former Prop trader from London now full time day trader. This guy has a few videos on his YouTube that are essential watching. He is to the point and does not hold back. Tells you what to work on and what to cut out.

- Rande Howell

Trading psychologist who focuses on building a winning mindset and helping the trader with calming the emotions involved with trading.

UKspreadbetting

- These guys have a pretty big channel that casts a wide net on all aspects of trading but they have a few interviews with some top guys that are worth watching namely:
- David Paul
- Corvin Codirla

Tom Hougaard

- Love this guy’s trading psychology videos and has live trading stream every week.

Courses

I have taken a few courses, most of which are paid for online, but I have found for free in forums/telegrams/torrents, but I have never really learnt an awful lot. They all contain the same stuff just wrapped up differently. Trading contains uncertainty, taking on risk is what produces our returns, therefore there is no holy grail. Screen time is all I can recommend for improving. I literally mean being at your charts and observing the market day in and day out.

Trading Simulator

This is probably my most valuable asset. I can test ideas, replay what happened, observe hundreds of trading days within hours. Observe, come up with theories, test those theories. Practicing this will improve you faster than anything in my opinion.

Mentor

Finally, I've been lucky to have found a mentor. Although they are like finding a needle in a haystack (because these days everyone is selling something), it is no harm to reach out to people on forums and see if they have any interest in talking to you. I would not have found mine without pressing the send button.


So, there we have it. Plenty within there to get your teeth into! Many thanks to the individual who pulled all this together for me. I hope you find some golden nuggets among the suggestions.