In this third presentation, we’ll discuss the part of the Trading Plan that deals with how and what to trade. As incredible as it might sound, many novice traders find the utmost difficulty levels when dealing with this subject. But how can this be? Tactics are simple, right? In Professional Trading Strategies (PTS) our students learn more than 20 different tactics to participate in any market. Well, the first step in our plan is deciding which tactics to focus on and in what timeframes. It’s not efficient to deal with all those tactics. Even if you knew them by heart, you wouldn’t have the time to look for them all, not to mention trade them, manage them and exit them. Therefore, we need to decide which tactics we’ll use as our trading tools.
Professional Trading Strategies (PTS) states that a trader should specialize in, and master 2 or 3 things. So, the first question you must ask yourself is which of these tactics to select. Then, once you’ve selected your favorites, you need to define precisely the quality of the setups you want to trade. This is important. Being “picky” in this business tends to pay in the long run. Defining what a quality setup should look like will help you to eliminate those that might seem to be tradeable, but are in reality lower odds. Thus, you need to define them in great detail. A Live Traders Buy Set-Up should be the first pullback after a Higher High (HH) in a stage 2 uptrend (define quality). The bars should be….” This will help you to avoid playing lower quality setups which will damage your batting average.
Then you need to establish the overall market, sector and internal conditions (on daily charts) you’d like to have in place in order to trade those setups. This will ensure that you focus on trading those setups which are supposed to move in the general direction of the major averages, increasing the odds of follow-through. Again, be precise: “I’ll give preference to longs if the averages have moved lower for 3-5 days into support, showing a Bullish Changing of the Color Bar (+COC), while the sentiment has reached an extreme oversold reading (for the market).
The thorough definition of your preferred setups (your edge, as defined by Mark Douglas) in the markets will sharpen its efficiency, allowing for the proper trades that will be managed using the Money Management techniques described in the previous article.
You can get this education from the Professional Trading Strategies (PTS) course as well as the Trading Plan Essentials (TPE) course. They are meant to hlpe traders build a new plan or fine tune an already active plan. One thing is for certain, trading without a plan is GAMBLING, pure and simple. So, if you’re trading without out a plan, then STOP. Professional traders use a systematic approach to the markets with great money and trade management, they most definitely DO NOT gamble. So, stop lying to yourself, and start building a trading plan that is conducive to your personal success as a trader. We’re all different, therefore each and every trading plan will also be a little bit different. Happy Trading!
