Traders often talk about the need to be patient but to be patient, we must know what we are being patient for. That is why we have a trade plan and know ahead of time exactly where to enter, where to place a stop, where to exit, and how much size to put on.
In this post, I continue with our trade planning exercise of 30 planned trades by making a trade plan for LEN. Keep in mind that the exercise is all about learning consistency and discipline and not about the method or whether the trade wins or loses.
In the video, I speak of not being worried about losing all 30 trades in a row. It’s not that I have steel nerves, it’s that I have planned ahead of time for 30 losses with my position size.
In this post, I’ll be sharing a trade plan for IOT, demonstrating the importance of creating a consistent and structured approach to trading. A well-defined trade plan offers the only control a trader has in the ever-changing and unpredictable environment of the markets.
Initially, the process of developing a detailed trade plan may seem tedious. This is a natural resistance from our minds, which often shy away from structured approaches. However, the focus of this post is to encourage you to move beyond searching for the ‘perfect’ method and instead build a solid foundation of learning discipline and consistency.
Implementing a focused, consistent method is like a framework that you can learn from and even design new methods from within that framework. The key is to focus on being consistent in what we do.
In the accompanying video, I show the components and processes of a swing trade and how I incorporate these elements into my trading methods. Instead of thinking purely in terms of technical analysis, I encourage you to consider structuring your approach around the simple dynamics of buyers and sellers, to gauge who is in control at any given moment.
I’m going to do a series of posts focused on trade planning, aiming to learn about consistency and discipline through practice. In this exercise, I will consistently plan, execute the planned trades, and document a total of 30 trades.
A trade plan is an essential tool for any trader. It consists of a method, trade management, position sizing, documentation, and review. The plan should clearly state, ahead of time, the specifics of each trade: where to enter, where to place the stop, how the trade will be managed, where to exit, and how to size the position. This level of accountability and responsibility offers a stark contrast to our usual approach, which often relies on ineffective emotional impulses for making trade decisions. It enables us to make informed choices instead.
In future posts, I will delve deeper into each aspect of the trading plan, discussing its importance and how to effectively implement it. However, it’s important to note that this exercise is not about the method, a setup, picking the right stocks, being right, winning, losing, or predicting markets. The focus here is not on the outcomes of the trades. It doesn’t matter if all the trades result in losses. The purpose is to learn about consistency and discipline through your own personal insight.
It’s through discipline and consistency that we begin to rewire old, ineffective habits and develop an effective mindset for trading in the markets. Consistently following a plan also provides a baseline that allows for meaningful comparison and learning. There is often resistance to this kind of structured approach. If you’re interested in adopting these guidelines, I encourage you to step into it as much as you’re ready for and make it your own.
This series is not meant for you to follow my trades or worry about my method or setup. It’s not important – my setups lose most of the time anyway. Use your own method; there are plenty out there. Focus on making it as simple and objective as possible. I also suggest starting out with simulation trading or using a very small size.
In How and When To Buy a Deep Market Correction Part I. I showed a simple and objective balanced swing technique to find a Change in Behavior (CIB) in the deep pullback. In this lesson, we ground the teaching by doing step-by-step practice in stocks, currencies, futures, and Bitcoin. We finish with lining up live examples in some weekly stocks. Practicing this simple technique will teach you to follow a deep pullback rather than trying to predict it. Make your own observations and discoveries about ways Change In Behavior can be applied.
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.
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.