Tuesday, 22 June 2010

My Trading Plan

I love the question: "How do you eat an elephant?"  and the answer: "One bite at a time."

There are lots of people out there promoting trading systems that rely on one winning trade making up for lots of losing trades. It just doesn't work for me and for anyone I know. High win rate and lots of smaller profits is what makes me money. A ten point buck trade (see earlier posts) doesn't come along two or three times a day or even every day. Lots of 2 point profits (ES) come along 5, 6 and more times a day.

I take my position size and divide into bites that I scale out of as I hit logical exit points. These can be all sorts of things including hi and lo volume, POC VAH, VAL and so on. I am also always ready to bail the whole position if momentum has run out of gas with the idea of re-entry if its appropriate.

This form of money management fits me, and many people I have traded with, both financially and psychologically. Taking profits feels good. Letting profits run while the move is in place feels good. Doing both is ideal.

When we got past the trading "setups" with Kiki, she spent time going over charts to satisfy herself what money management made sense. Its something she had to do for herself to KNOW and BELIEVE. Once you have done all the back testing and SIM and have confidence in what you are doing, you can get to CP. If you don't do that work, I believe that CP will remain elusive.

Today's trades in ES RTH started with a sale against the VAL of the split Profile. I was tempted to do another split as there was a double print half way up but it would not have made much of a difference in this trade. Context rules. Trading without it is like Luke Skywalker trying to use his light saber with out the Force being with him. After that it was a matter of selling pullbacks.

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