Design Your Own Trading Methods: Part 3

Design Your Own trading part 1 was about understanding the swing cycle and its process. Part 2 was learning some definitions and making some distinctions so we can map. In Part 3 we explore the 3 basic ways there are to trade, range trading, breakout trading, and swing trading. When talking about methods or setups, it’s important to approach the subject in an effective manner. No setup works in a vacuum and no setup has statistical probabilities. The only edge you have is your understanding of the market at the time of the setup. This understanding comes from learning the language of price and being able to map your market and the personal experience you develop from this frame of reference.

Truth Dispels Fear – 11/29 Live Session Clip

This is a clip from our Language of Markets Live Session on 11/29/21, while the markets were looking relatively scary. In this piece, I show how to ground ourselves to see what is true in the market structure when emotions are heightened. I also talk about using simple Median Line tools to develop an understanding of the push and pull rhythms of a market.

Design Your Own Trading Methods: Part 2

In Design Your Own Trading Methods: Part 1, we developed an understanding of the different phases of a swing cycle and how it moves in contraction/expansion so we can develop tactics for various parts of the cycle. In this next step, I go over some of the principles of price flow and define the components, and process of a swing so we have an objective frame of reference. With just this step of mapping, you never have to ask anybody what they think about a particular market, you just look for yourself and see what is true.

Design Your Own Trading Methods

This is the first part of a series on how to design your own trading methods. These methods can be from what you have observed in price flow, or they can be methods you have learned and want to adapt to your needs the way you see. It’s beneficial for us to participate in the authorship of the trading methods we use, and to make them ours.

Whatever we design will have to adhere to the principles of price flow. For example, everything moves in contraction/expansion and all market structure is a derivative of gaps and swings. From this observation, we can start to build on solid foundations and come up with numerous methods.

In this video, I want us to get a solid understanding of how price moves in a swing cycle. A swing moves in process and each part of the process has its own components and characteristics. If we understand this, we can design methods and tactics for various parts of that cycle.


Intuition Comes Unbidden

This comes from our Language of Markets Live session on 8/9/21 where we chose the GBP/USD 20 minute to do a lesson on how to map a market simply and objectively and to start with “what is”. The lesson was about much more than mechanically following objective instructions for a setup. It was about facilitating true learning. The focused, simple, and objective has the effect of relaxing our minds. It’s in this relaxation that intuition and our accumulated experiences become available to us in a way that brings a trade together.

Simple Swing Trading-Part 3

In Simple Swing Trading Part 2, we took our swing and placed it into several contexts. In this video, we learn ways to follow the market with a single CIB (Change In Behavior) line in the pullback phase. We allow price flow to tell us where the buyers or sellers are and when that changes so we can manage risk. This is much different from the nervous experience of trying to predict where a swing should land. One of the things I try to get across in this video is the uncomplicated nature of following (as opposed to leading) price flow.

How To Structure a Trade Plan: WEAT

This is a Clip from one of our Language Of Markets Live Sessions. I show how to structure a trading plan from beginning to end using a daily WEAT chart which is an ETF of the Wheat futures market. Having a plan of the things you can control goes a long way when it comes to your trading consistency and conserving phycological energy. See Foundations Of Trading Part 6 post for more on trade planning. Your trade plans will be unique to your needs but you can use this as a guide.

Basically, know your method and design rules for:

  • Entry: Know what gets you in
  • Initial stop: know where your stop goes
  • Money management: Know your position size and trade management after in trade
  • Exit: know what gets you out

Structuring A Trade Plan

In recent live sessions, we have been going over how and why to structure a trade plan so that we are not making ineffective emotional decisions on the fly while under pressure. In this video, I demonstrate making a precise trade plan on SAP. Use this example as a guide to designing your own trade plan where you:

Know our method and design precise rules for:

  • Entry: Know what gets you in
  • Initial stop: know where your stop goes
  • Money management: Know your position size and trade management after in trade
  • Exit: know what gets you out

Simple Swing Trading-Part 2

In Simple Swing Trading part One, I went over the components of a swing and described what simple swing trading is. In this video, were going to take our swing and learn how to see it in two different contexts that will produce the swing. The first will be the first pullback after a breakout of a range. The second will be a balanced reaction leg. In both, we wait for a pullback and a swap of price as a confirmation. I talk about confirmation parts of the swing in “Learning To Read Price Action Part 3″ and” Left and Right Side of a Pivot Entry”.

Foundations of Trading Part 6: A Balance Of Structured and Discretionary Trading

Trading is simple, but difficult due to the uncertain, uncontrollable, ever-changing nature of markets. It’s normal to have emotional reactions to having to make many decisions in an everchanging environment where our money and self-worth are on the line. We can talk endlessly about the phycological side of trading and of dealing with trader’s bad habits, but all it does is make you think there is something wrong with you. Instead, there is something we can do that handles many of these so-called bad habits in one swoop. We can structure a trading plan where we control the things that we can control and make many of these decisions ahead of time so that we are not doing it on the fly while under pressure. I walk through some of this in the video.

Know your method and design precise rules for and know ahead of time:

  • Entry: Know what gets you in
  • Initial stop: know where your stop goes
  • Money management: Know your position size and trade management after in trade
  • Exit: know what gets you out

Now you have limited your decisions down. You can choose to follow the plan or not. If over a period of trades you find that the plan sucks, re-work parts of it and do it all over again for another period of trades. After you have developed the discipline of following your plans, you can have flexibility within your structure.

There is a balance we must find between being too loose and being too rigid. Too loose, and we are all over the place and can’t get any consistent results to evaluate. Too ridged, and we risk not being able to adapt to markets. No plan you can design will be perfect, they all will have possibility and limitation, but I have found in my own trading that having a mediocre plan is better than having no plan. Mostly, we need to match up to our particular method with the money management plan that works well with that method and then follow the plan. You may have some resistance to all of this structure, but take it one step at a time as your ready.