Cross ref from Rays’

You can read the whole series at his blogs.

The Education of a Trader (4)

Published in April 9th, 2010 |

BarroMetrics Views: The Education of a Trader (4)

And now we come to the trading plan. This is what most focus on; yet for me while a robust plan is essential, the focus is over-the-top. If you have never made money, then looking for the best-wham-bam plan probably is a waste of time. It would be better to start with a plan of few rules and learn to execute as consistently as possible.

Now I am not going to tell you that you should never vary  your rules. The most recent research shows that since trading is based on subjective probability, our brain will treat trading as an ambiguous event. That being the case, we (as humans) have no hope of being 100% mechanical – unless of course you use the computer to place your trades.

What I am going to say is if you do vary away from the rules, record the event in both the psyche and equity journal. Keep track of your variation trades. Identify what leads to profit and what does not.

It’s difficult to provide a template for a robust plan given the best one  that fits your personality like a second skin. That does not  mean I haven’t tried. In fact, I have written a series on the subject, with the first in the series at: http://tradingsuccess.com/blog/the-trading-plan-1067.html

At the end of the day, a plan answers to key questions:

  1. Do the probabilities favour the trade?
  2. How do I manage my trades – from initial entry to ultimate exit?