12 Oct Writing a trading plan — part 5
Writing a trading plan
One of the best sources out there for learning anything about trading is definitely without a doubt; Investopedia. So many highly professional contributors and knowledge to be found there. That is also where I found this article on ‘Building the Perfect Master Plan’ by Matt Blackman.
So thanks to Matt and thanks to Investopedia.
Part of a series
This is the fifth part of ‘writing a trading plan’. Not sure how many parts it will have because that all depends on how much work each part will take to write. I will continue this series until I have a working trading plan that I can be consistent with. I will mention all mistakes and things that did go well to the best of my ability and in all honesty. Thanks for taking the time to read it.
Click here for my disclaimer. It basically says that I am on my path to becoming a trader and these are just my opinions on how to approach learning to trade. Feel free to check it out and comment on it.
Here it goes…
Summary so far
In the first part of writing a trading plan I talked about things like skill assessment. You first have to learn some basics before you have a better understanding on how to make a plan. Then I took a look at ‘mental preparation’ and made a mantra for myself. A mantra I will say before I start my trading session. Afterwards, I established the amount of risk I am willing to take. This was primarily based on my balance chart, take a deeper look into my balance chart here. At the end of the first part I wrote about my personal goals regarding trading.
In the second part I wrote about doing your homework. The things that, in my case, crude oil has correlations too. News to read. Financial instruments to watch in order to prepare myself for a trading session. Then I concluded that because I trade the very small time frames I don’t have to take them into consideration that much.
In the third part I wrote out my thoughts on ‘trade preparation’ and defined my exit rules. The exit rules come before the entry rules because they are more important. Most people tend to neglect these thinking the entry rules are more important. I defined my trade preparation as doing the technical analysis on the charts that I am trading at. On top of this the mental preparation that goes into starting your trading session.
In the fourth part I wrote about surfing the waves by setting entry rules. I dove into what time frames I use and how I look at them. I even discussed how my trading setup is, well,.. Set up. I also discussed my strategies a little for different time periods of the day and week.
In this fifth part I will continue following the trading plan outlined by Matt in his article on Investopedia. The remainder of the items are:
- Keep Excellent records
- Perform a Post-Mortem
So let’s get started with working on the next item which is ‘keep excellent records’.
Keep excellent records
This is probably the most important part of your trading plan. By keeping excellent records of your trades you can get first-hand insights into the mechanics of how you trade. Makes sense right?! By doing this you will learn what you are doing right, but even more important, what you are doing wrong. So let’s get to it.
Where to track?
I have been using Trello for a long time for organizing my thoughts on learning and work, and basically life in general. I use Trello for basically everything. If you don’t know what that is… Just click here! It is a fantastic piece of online software and the best thing of all… it’s free. Go on and give it a try at Trello.
What to track?
In keeping excellent records you need to know what to keep track of first. So I made a list of the things I want to keep track of and I’ll explain each point further in detail if need be.
- What are my targets?
- Profit target for the day/week/month
- Loss target for the day/week/month
- Entry and exit of each trade
- This one is going to be hard since I take many positions because of my scalping nature. However, I will still have to record these if I want to learn from them. I have the option to either write it down on a notepad or use my Samsung Note Pro 12.2 tablet that has a stylus pen. With this I can directly upload it in digital format to Trello so this will be the option that I choose.
- I will have to record the time, support and resistance levels.
- The support and resistance levels I will plot on the 4 hourly chart. THe higher the time frame the more the levels are ‘valid’.
- Keep track of the daily opening range, market open and close for the day. For me this means to keep in mind what that daily range is and where we are at now as opposed to it. I will use the information off www.investing.com for this purpose.
- Comment on your trades
- Why did you make the trade and what have you learned?
- Print out the trades for that day by making an account statement report or whatever the platform you are using calls it. Something that shows your trades, when you opened and closed them, etc.
- Save trading records in a central place, which for me is Trello. Every weekend I’ll go through my trades for the previous week. More on this when I make my schedule that outlines all tasks for the week. I’ll post this as well so that you get a better idea on how I schedule these things and set myself up for trading that day.
Performing a Post-Mortem
At the end of each trading day I need to write down my conclusions of that day in my trading journal. This way I can go back and see how I felt on a particular day and what I did right and wrong. Sometimes I feel too excited and because of it I will over-trade. Sometimes I feel too ‘down’ and I’ll still over-trade but in a different way. The latter has more to do with trying to make up for losses by over-trading. The first one is more about riding the ‘high’ of making some profit in the market.
Wrapping things up
This was a five part series on ‘writing a trading plan’. This helped me to focus more on the separated parts of how my plan should be written and what I should be focussing on. Makes sense huh. Now the next thing for me is to make the actual schedule where I allocate time to each task on a regular basis.
As always thank you very much for reading. Please let me know in the comments what you think and how your path to becoming a trader is going like.