Develop and follow a written trading plan

Discussion in 'Trading' started by Chuck Krug, Feb 20, 2018.

  1. volpri


    Storyline to be successful. At least goals to strive towards. (at least for me, the way I trade)

    1) high win rate
    2) average winner bigger than average loser
    3) largest winner bigger than largest loser
    4) net at end of the day in the positive after comm.

    #211     Mar 6, 2018
  2. mbondy


    Methinks the lady doth protest too much.
    #212     Mar 6, 2018
  3. wrbtrader


    Words have no power to impress the mind without the exquisite horror of their reality. - Edgar Allan Poe
    #213     Mar 7, 2018
  4. So easy to say....
    so difficult to accomplish.
    #214     Mar 7, 2018
    wrbtrader likes this.
  5. wrbtrader


    So very true.

    Threads like this that recommends traders should "develop" and "follow" a trading plan are just too easy to post. In contrast, the other threads like "What's your trading plan" or "How to setup a trading plan" or "Post your trading plans" have a little more substance to them.

    Unfortunately, too many folks think in error that "trading plan" means "trade strategy"...

    Trade Strategy is just a sub-group of Trading Plan.

    Regardless, anybody can make a trading plan. A lot more difficult to have the discipline to follow a trading plan to give a trade strategy a chance to be successful.

    #215     Mar 7, 2018
  6. volpri


    #216     Mar 7, 2018
  7. volpri


    It can, at times, a appear to be easy but really never is easy. Traders are placing bets on futures outcomes that are largely unknowable. In addition to that, our brains are wired to avoid risk. We tend to think in linear terms. Because we believe math is an exact science we construct such ideas as reward/risk/probabilities. These constructs give us a measure of security, in a world of uncertainty. They also theoretically sound good. Like network marketing. LOL

    Our brains like shortcuts. We develop biases. We see the market in simple linear terms, but the market is complex and dynamic. But our brain attempts to deal with the markets in simple linear terms. Just because we have a rule that my reward will be twice my risk doesn’t change the dynamics of the market one iota. How many losing traders have followed the touted rules to the very best of their abilities and find themselves ending up quite unsuccessful. We write our plan. We devise our rules. We implement it to the best our our ability. We expect to be profitable because of our discipline. But, we find ourselves losing over and over again despite our carefully crafted plans and rules, and our slavish discipline to implement them. What has gone wrong? We are told we just haven’t found an edge yet. So....more books...more seminars....more classes...more linear thinking. We try out more indicators based on linear thinking. Finally, we give least for a while. We call ourselves “taking a break” from the markets. It is generally because we have depleted our trading account.....

    While reward/risk/probabilites are linear and perhaps mathematical (but most of the time don’t work out for most of us) we would, I think, be better off thinking in terms of reward/risk (if we must) and possibilities as opposed to the former. Possibilities is opened ended thus giving us a mindset to be flexible ...change on a dime...and help us to operate better in an uncertain environment like the markets. Our brain seeks simple linear answers to complex dynamic situations and this tendency trips us up. Our brains can lose our trading capital faster than you can say “jump in a lake”. Besides the markets knows nothing of, nor will ever know, nor will ever care to know, and in fact, doesn’t need to know ANYTHING about our carefully crafted plans and RULES. So why.. oh why we sit around crafting one after the other as each one subsequently fails (perhaps after working for a bit). Even HTF’s know they continuousley have to rewrite code and restructure. It works a while, then it doesn’t. That is why so many rush onto the scene then soon disappear. Just look at citadel and the latest in the news about them.

    I propose we as traders would do better to focus on reading and following the dynamics of the markets. How it inhales and exhales. How it moves. When it tends to move. We need a toolbox of tools we can reach in and pull out when what appears, to be the best tool, for the dynamic in front of us. That is, a tool that fits the senario. We have to maintain an open flexible mind as the market is open and it is flexible and can bend in ways we never thought possible. So, IF we can develop and fine tune the skill of reading and following the dynamics i believe we will find ourselves to be much more successful in this endeavour. We simply cannot allow ourselves to be in denial when trading the markets. It is what it is and nothing else. Remember, we are operating in a very uncertain, and largely unknown senario, and we are placing bets on future outcomes that we cannot control, or create.

    We like to speak and think in terms of probabilities (i myself find myself doing this) when to do so means we are giving statistical weight to different outcomes, and this is basically a useless process simply because there will always be unknowable variables and worse we can never know just “how” many of these unknown variables exist at any given time. Therefore, the situation is basically incalculable and cannot be repeated with any real certainty as much as we like to calculate and repeat! LOL


    1) Invest your time learning to read the dynamic as opposed to understanding indicators and applying them.

    2) Find, learn, or develop tools for trading that work in multiple senarios

    3) Keep a VERY open mind. Think in terms of POSSIBILITIES instead of PROBABILITIES.

    4) Let the market draw your plan for you each day. Follow it.

    5) Never, ever box in the market saying it has to do this ...or give me this reward for this risk or I ain’t playing the game. Accounts bleed to death over stoplosses being hit when following all the linear rules on risks. Getting stopped out alot means you are not reading the dynamic well.

    The best metrics IMO that show if one is reading the dynamics well and “playing ball” are:

    1) High win rate (why wouldn’t a body want such a thing pray tell me? Some traders seem to think it is a useless measurement)

    2) Average win bigger than average loss

    3) Biggest win bigger than biggest loss

    4) Net profitable at the end of the day

    All other linear measurements tend to fall by the wayside in the light of the above. Of course, there are days where a trader is really really sharp in execution and in reading the dynamics, and the above metrics are outstanding. Other days days dismal. That is the human factor.

    Think about it!

    Es 3-7-2018 one.PNG

    ES 3-7-2018 two.PNG

    In light of what I wrote above look at my performance for today. Win rate ...good.. but not excellent. Not so good average win to average loss. Biggest win to biggest loss Ok but nothing to brag about. Net profitable YES. So, I did ok on 4 out of 5. That indicates I read the dynamics fairly good today but certainly not with excellence and the precision that I like. Of course, I quit trading to write the above and doing so required me to "think" writing instead of trading so I missed out on a lot of trades since 10:50 a.m. If I had traded from 10:50 until now that average win/average loss metric may have been better. Nevertheless, it is what it is. I am finished for the day.

    Again, I am a retail trader that is a low roller not a high roller. I generally don't trade size although the mind does "wander" in that direction investigating senarios! One day I might "slip" over the cliff. Most trades are 1 or 2 contracts. sometimes 3. Once in a while 5 and on rare occasions 10. I need fishing worm money......I live a simple life.
    Last edited: Mar 7, 2018
    #217     Mar 7, 2018
    slugar likes this.
  8. Good stuff volpri....
    I see you your ATIT (average time in trade) has moved up to 8 minutes.
    I guess that varies with market volatility.
    #218     Mar 7, 2018
  9. volpri


    Thanks. That and some trades were pre RTH so slower dynamics. I generally like to be in the market in short bursts. I figure my money is ONLY at risk when it is in the market. I had rather grab a profit wait for small pb and enter again. That way I am locking in profits and compounding profits instead of holding for a larger move. It just fits me better but I am a daytrading scalper. Not all are.
    #219     Mar 7, 2018
    slugar likes this.
  10. volpri


    I am finished for the day here are the results. I didn't take many trades in the NQ. Got too busy yapping on the phone with a friend. I may post tomm trades if I trade tomm. Then that will pretty much rap it up. I think I will have posted enough trades to illustrate my points over the last two weeks. In the ES below (first two images) the win rate was decent but not what I call really good. The average loss/average win was good. Largest win vs largest loss good.

    In the NQ win rate ok but nothing to brag about. average win/average loss ..ok but not good...biggest win vs biggest loss ...ok but not good

    ES Stats one.PNG

    ES Stats two.PNG

    NQ Stats one.PNG

    NQ Stats teo.PNG
    Last edited: Mar 8, 2018
    #220     Mar 8, 2018
    slugar likes this.