But creating a robust trading plan you actually stick to is another matter!
Within a few minutes you’re going to:
Like many traders, you’ve probably spent the weekend constructing a plan, you’re all fired up for the market open on Monday and within days you’ve ignored it completely and are back to square one.
Let’s change that right now…
If you are an active trader, the whole point of a trading plan is to give you a set of rules and a roadmap for trading the markets.
It doesn’t matter if you are a day trader, swing trader, scalper, trading stocks, forex, equities or far month orange juice futures!
Your trading plan outlines how you will act and trade under specific conditions.
A good trading plan removes as many unnecessary ‘on the fly’ decisions as possible. Leaving only the trading decisions you need to make to perform.
(I think it’s important to note you aren’t trying to create an automated system here. You are a discretionary trader making trading decisions based on charts, order flow and other pieces of data. Incidentally If you are trying to automate then here are two podcast episodes to check out later. Robert Carver and Jarrod Goodwin)
The trading plan rules aren’t meant to remove your ability to trade with discretion.
The rules of the trading plan are designed to keep you focused on the job at hand.
Let’s explore.
This is where many traders slip up.
They add pages and pages of rules and regulations.
“Do this, don’t do that. Take this trade, not that. Wait for this candle, not that.”
It’s a sea of trading rules you cannot possibly stick to!
And once you break a rule, it’s too easy to throw the whole trading plan out of the window.
We don’t want to do that…
You want a simple trading guide with a few clear rules that will help you:
The plan is not there to remove all the intuition and discretion from your trading. As a discretionary trader, you need to nurture that trading intuition not suppress it.
You want risk rules, trading strategies and goals.
Long multi-page trading plans will not be adhered to. (you know ‘cos you’ve tried it right!)
A simple plan that stays on your screen next top your trading charts during the day will help you remember what’s important.
So if we’re agreed that long trading plans aren’t that useful. How do we add all the information we need into the plan?
By using a modular approach.
What does that mean?
Our trading plan should be simple, but link to other more in-depth documents.
For example:
Let’s say we want to use a specific trading strategy in our plan. And let’s use the solid opening range breakout strategy as an example.
What we don’t want to do is fill the plan up with the rules, trade filters, trade triggers, example screenshots etc for that strategy.
The trading plan needs to be simple, but we still want to go into depth and document the trading strategy in as much detail as possible.
Nuances like when to pull the trigger on a trade, targets, stop loss areas, add points, scaling rules, sizing.
If we don’t want to clutter up the plan what do we do?
The answer here is to reference the trading strategies from within the plan. But have a separate trading strategy document that goes into more detail.
This modular approach allows us to add multiple strategies into the plan, yet keep the master plan simple to read.
Another example of a key component of your trading that needs to be in your plan might be a trading routine or trading checklist you want to run through at specific times.
Trading checklists are a great way to ensure you stick to a process you know gives you the highest chance of success.
Yet you don’t want to outline every checklist in your plan.
You want to reference that checklist and have that documented elsewhere. The modular approach.
Example trading checklists:
All very important, but again we don’t want this cluttering up the plan…
Just a reference.
(In the trading plan pro app, checklists and routines are separated into operations and mindset.
Operations are checklists to help you align with market conditions, mindset are checklists to keep your trading psychology in check.)
