In this post I have written my personal trading plan out with the world to see and review. I have asked trading expert Kim Krompass from the Price Action Institute to review my plan and find holes in it to make it better so I can adjust and improve. I believe in reviewing something with critical thinking so that I can become the best I can and make money in the markets. So first you will see my plan then below you will see Kim’s comments. Additionally please share this article via social media and leave your own comments on my trading plan in the comments section.
Core Values: Mission Statement
Purpose for trading: my trading will fit in with my core values in life to live a complete and fulfilled life serving my family and my community in my world. That’s very simple just a one-sentence statement to help me keep my vision in front of me so that I don’t lose sight of it.
Foundational Components of plan:
I am going to trade Monday through Friday 8 a.m. And 8:30 everyday I’m going to spend 30 minutes a day 5 days a week trading I’m going to be looking at the weekly and daily time frames. I am looking to hold trades for 3 days up to 3 months. With a target of 300 to 1000 pips and a risk to reward of minimum 1 to 1.
My strength is my ability to read the charts into where the market is going and also my understanding of technical analysis.
My weakness is following the plan maintaining the discipline do I need to execute my strategy.
Profit goal is 10% return on investment in the first quarter of 2015.
To Follow Trading Plan.
To do quarterly reviews of my plan.
Step 1: Daily Process
I believe successful trading is a process and I will go through the same process every day the same way before I make a trade. I will continue to use the same process until I purposely change it because I believe I have found a better way. So as I am explaining the strategy remember this is the same step-by-step process that I use that I will use everyday when analyzing the charts. This will be a simple strategy since I am only trading for 30 minutes a day I have to have something and find a good trade.
Step 2: Technical Analysis
My strategy will be using weekly and daily charts to identify the trend. I will use trend lines to determine the direction of the trend that I’m trading. Once I find a good trend I will then use support and resistance levels to find a potential entry area. I will also check Fibonacci levels for confirmation. I will also be looking for price action and Candlestick patterns such as pin bars and engulfing candles to plan my entry.
Step 3: Fundamentals Analysis
I will check the news reports and fundamental numbers and write a statement on where I believe the fundamentals are telling me the pair will go.
Step 4: Plan the Trade
Once everything is lined up I will begin to lay out the actual trade. I will set an entry order or market order at the location where I want to enter the trade. If you don’t have a good trading plan you will fail. Click To Tweet
Risk To Reward:
I am looking for a 1 to 1 minimum risk to reward ratio on my trades with a goal of 3 reward per one risk. Since these trades are on a large time frame and will take some time to develop I will risk up to 5% per trade. With a goal of 15% What that means is if I win one trade by hitting my goal I will already have hit my profit target for the quarter. I will be willing to add positions to the trade. I will add if the price moves in favor or against me.
Here are the conditions I will add:
- If I get an additional price action signal in my direction.
- If I hit another support or resistance level.
I will add a total of 3 positions which will equal a total of 5% I will add 3% on the first trade and each additional position will add 1% of risk to the trade.
Stop Loss Movement:
I will lock in profit based on the price action of the daily bar.
Trade Example: To show the process of how I trade.
I have 5 points of confirmation see above image:
Fundamental outlook for Australian Dollar looks to be improving with recent job numbers improving and recent price bounces. Additionally weak jpy is much coveted by the BOJ and they will be working at making the weak yen if possible.
One other bonus for this trade is positive swap on the trade.
Swap Rates Below:
Enter at 96.89 with initial tp of 103 = 607 pips If price looks good at time I get to TP may extend TP for additional Gains. Risk 3% with a stop loss at 90.89 = 604 pips. Add additional 1% with price action or support or resistance areas.
Outside trade plan review:
Trade Plans, like any plans, whether they are for a business or for your personal life all have 3 things in common in order for you to be successful. They must be:
- Measurable and
- Time bound
Casey’s trade plan has touched on all 3 parts that make goals or plans successful. Before I dive into some of the areas that may be improved, let me first look at what makes a good plan.
Recently, I dined at the famous French Laundry restaurant in Yountville, CA.
If you are unfamiliar with the restaurant, it has been named as one of the Best Restaurants in the world and has a Michelin 3 star rating. The restaurant has earned numerous awards and accolades in the press and among food critics worldwide.
There were 2 things that struck me about the French Laundry experience. The first was just how well run the business is, and how the world renown Chef’s in the kitchen are following recipes that will guarantee a successful outcome of food. Now whether or not you like the food ( and honestly, I didn’t care for a lot of the food) is not the point.
What is the point however, is that both the operation of the French Laundry and the food preparation follows a 5 step success plan:
- Vision-the Chef’s have a beautiful picture of what the food is to look like as it lands on your table and they want your experience in the dining room to be like royalty
- Sequence- they have an exact sequence of steps to go through for the dining experience
- Specific Ingredients- they know the exact ingredients they must use to prepare the food
- Measurement of Actions- they know the specific measurement of each ingredient in each dish they prepare.
- Deadlines – they know the exact time and temperature they must use to produce such exquisite dishes. There are 2 sittings each night for dinner and you must be on time.
So on to the trade plan:
The vision for “why” you trade must be specific. The reason all of us trade is to make money. Now the “why” of what you want to make the money for should be clearly stated. Just being a good family person is not motivating enough to keep you focused day in and day out, especially when times get hard in the markets.
All traders want to make money. But again…let’s be specific. For example:
I will make $20,000 trading by December 31st, 2015 in order to take my family on a European vacation in May 2016. Or I will increase my retirement income trading by 10% in 2015 and use it to pay off our mortgage. Or I want to make $1000 a month to save for retirement. That’s being specific as to how much money you want to make and why you want to make it.
So in Casey’s plan he has several areas where he is specific. Trading times will be Monday through Friday 8 AM – 8:30AM. He wants a 10% profit by the end of the 1st quarter in 2015.
He has a specific risk to reward of 1:1 and he will risk no more than 3% per trade. But there are gaps or holes that still need to be addressed.
Like a recipe, I would like to see his vision, his actual sequence of steps, the specific ingredients, the measurable actions and more deadlines. What would that look like? I will make $500 a month in 2015 trading to help fund my daughters college education account. I will hunt for my setups Monday through Friday 8AM – 8:30 AM. I will only take trades or use pending orders to take trades using the 5 confirming signals on a daily/weekly chart. I would forget the fundamentals as that is a subjective and very hard to quantify. I will risk no more than 3% per trade and I will only take trades that have a minimum of 1:1 risk to reward.
At the end of the 1st quarter in 2015, I will review my progress and make any adjustments if needed.
It is simple…it is straightforward and you know exactly why you are doing what you are doing every day you sit down to look for trades.
I want to thank Kim for taking the time to help me become a better trader and to help all of you see the process that we are going through so that you can go through a similar process in the creation of your trading plan. Please share your comments on my plan or on Kim’s comments. I do plan on making some adjustments soon because of Kim’s feedback.
Winner’s Edge Trading, as seen on: