My open book trading plan - Two month test

[CanOz]

Ok, so heres my plan.

I'm going to trade this out over two months of normal seasonal weakness. I'm not actually taking trades, only recording them (paper trading).

Feel free to add any helpful comments.

Heres some guidelines (Got these from Nick's course) and i use them in my trading plan, which is essentially this:

-Capital: 75,000 AUD (i would normally trade CFD's with approx. $30k)
-Universe: Will be my IG Market list that Lesm kindly gave me for the mech system testing. It can go both long and short (most of the time )
-I will attempt to take long and short positions in stocks that present low risk entries using typical chart pattern analysis, incorporating some VSA, and some really primitive EW.
-I will only risk 2% of starting capital on any trade, using strong support/resistance and fixed fractional positioning to determine quantity purchased.
-I will move stops to B.Even ASAP.
-I will use a trailing stop (higher low)
-I will use a profit stop (50% increase in less than 2 bars) to be honest i have not really thought about this allot yet, i am interested in suggestions here.
-Anything i'm missing here?


Cheers,

 

[ta2693]

Ok, so heres my plan.

I'm going to trade this out over two months of normal seasonal weakness. I'm not actually taking trades, only recording them (paper trading).

Feel free to add any helpful comments.

Heres some guidelines (Got these from Nick's course) and i use them in my trading plan, which is essentially this:

-Capital: 75,000 AUD (i would normally trade CFD's with approx. $30k)
-Universe: Will be my IG Market list that Lesm kindly gave me for the mech system testing. It can go both long and short (most of the time )
-I will attempt to take long and short positions in stocks that present low risk entries using typical chart pattern analysis, incorporating some VSA, and some really primitive EW.
-I will only risk 2% of starting capital on any trade, using strong support/resistance and fixed fractional positioning to determine quantity purchased.
-I will move stops to B.Even ASAP.
-I will use a trailing stop (higher low)
-I will use a profit stop (50% increase in less than 2 bars) to be honest i have not really thought about this allot yet, i am interested in suggestions here.
-Anything i'm missing here?


Cheers,

How about add sell on Monday and buy on Tuesday into your plan. I find the whole market will up in Monday and fall in Tuesday basically.

 

[nizar]

Ok, so heres my plan.

I'm going to trade this out over two months of normal seasonal weakness. I'm not actually taking trades, only recording them (paper trading).

Feel free to add any helpful comments.

Heres some guidelines (Got these from Nick's course) and i use them in my trading plan, which is essentially this:

-Capital: 75,000 AUD (i would normally trade CFD's with approx. $30k)
-Universe: Will be my IG Market list that Lesm kindly gave me for the mech system testing. It can go both long and short (most of the time )
-I will attempt to take long and short positions in stocks that present low risk entries using typical chart pattern analysis, incorporating some VSA, and some really primitive EW.
-I will only risk 2% of starting capital on any trade, using strong support/resistance and fixed fractional positioning to determine quantity purchased.
-I will move stops to B.Even ASAP.
-I will use a trailing stop (higher low)
-I will use a profit stop (50% increase in less than 2 bars) to be honest i have not really thought about this allot yet, i am interested in suggestions here.
-Anything i'm missing here?


Cheers,

Hi can.

Just on the first point i used to do this, ie. use 2% but i found that it was too much. Now i use 0.5-1%.

Also -- a good idea in my opinion would be to use a % of total equity to risk per trade, so as your acct decreases you risk less and as it increases you risk more. I think it was in Mike Lally's Mastering Risk is where i first read this.

For discretionary trading, i dont see why its a hurry to move the stop to breakeven, as you could miss the whole move. Make sure there is definate support created first and then put your end of day stop a touch below that.

But thats just my thoughts. Obviously Nick knows alot more than me.

 

[wayneL]

Hi can.

Just on the first point i used to do this, ie. use 2% but i found that it was too much. Now i use 0.5-1%.

Yes, particularly if you have a bunch of correlated instruments such as stocks. 2% on an individual position can translate to a lot more on a portfolio level, depending on when positions were entered and so on.

As a simple example (just for the sake of argument) if you entered 5 stocks today, you actually have 10% of correlated risk... not this little black duck.

It might not be totally optimal, but 1% risk suits me too.

 

[nizar]

Yes, particularly if you have a bunch of correlated instruments such as stocks. 2% on an individual position can translate to a lot more on a portfolio level, depending on when positions were entered and so on.

As a simple example (just for the sake of argument) if you entered 5 stocks today, you actually have 10% of correlated risk... not this little black duck.

It might not be totally optimal, but 1% risk suits me too.

Yes, very true.
A good example of this was tuesday!
LOL

 

[It's Snake Pliskin]

Ok, so heres my plan.

I'm going to trade this out over two months of normal seasonal weakness. I'm not actually taking trades, only recording them (paper trading).

Feel free to add any helpful comments.

Heres some guidelines (Got these from Nick's course) and i use them in my trading plan, which is essentially this:

-Capital: 75,000 AUD (i would normally trade CFD's with approx. $30k)
-Universe: Will be my IG Market list that Lesm kindly gave me for the mech system testing. It can go both long and short (most of the time )
-I will attempt to take long and short positions in stocks that present low risk entries using typical chart pattern analysis, incorporating some VSA, and some really primitive EW.
-I will only risk 2% of starting capital on any trade, using strong support/resistance and fixed fractional positioning to determine quantity purchased.
-I will move stops to B.Even ASAP.
-I will use a trailing stop (higher low)
-I will use a profit stop (50% increase in less than 2 bars) to be honest i have not really thought about this allot yet, i am interested in suggestions here.
-Anything i'm missing here?


Cheers,

Can,

Moving to break even is determined by what? A percentage of move? Or just in an arbitrary discretionary manner?

I think you are trading too much risk at 2% - Wayne gives a good reason for this too. Correlation of holdings is fooling your mindset on risk. It is total capital unless you want it to rise with profits - 3% if trading well?

Pertinent question for me: proteceting capital and surviving aside, what are you trying to achieve return wise? Realistically.

Cheers....

 

[happytrader]

Hi Canaussieuck

Make your trade entries towards the last quarter of the 5th hour. At the beginning of the trading day the only known is the opening price. The range and close are anybody's guess. However, by taking a look in the 5th hour you get a pretty good idea whether or not the pattern setup meets your entry requirements.

Cheers
Happytrader

 

[theasxgorilla]

It might not be totally optimal, but 1% risk suits me too.

And I seem to recall recently you were saying that you don't actually experience that much in the way of drawdowns when you trade.

 

[Porper]

Ok, so heres my plan.

I'm going to trade this out over two months of normal seasonal weakness. I'm not actually taking trades, only recording them (paper trading).

Feel free to add any helpful comments.

Heres some guidelines (Got these from Nick's course) and i use them in my trading plan, which is essentially this:

-Capital: 75,000 AUD (i would normally trade CFD's with approx. $30k)
-Universe: Will be my IG Market list that Lesm kindly gave me for the mech system testing. It can go both long and short (most of the time )
-I will attempt to take long and short positions in stocks that present low risk entries using typical chart pattern analysis, incorporating some VSA, and some really primitive EW.
-I will only risk 2% of starting capital on any trade, using strong support/resistance and fixed fractional positioning to determine quantity purchased.
-I will move stops to B.Even ASAP.
-I will use a trailing stop (higher low)
-I will use a profit stop (50% increase in less than 2 bars) to be honest i have not really thought about this allot yet, i am interested in suggestions here.
-Anything i'm missing here?


Cheers,

Great idea CanOz, and you are brave having a go, hopefully you won't get critcised and will get positive feedback while you are doing this.

I used Nick Radges 2% for a while but have to agree with Wayne etc, get a market correction (even a small one) and 2% on 5 stocks with tight stops and you have lost 10% of your capital.I use 1.5% now as any less and I can't buy big enough parcel sizes with my limited account size.

Adaptive Analysis states to move stop to breakeven when 1.5 - 2 times your initial risk is lost.I think it works, yes you will get stopped out occasionally, but if you work this in with your low risk entries, your stops should be ok most of the time.

Of course if it was proved you had a positive expectancy you could trade at a lot higher than 2% risk and trade for optimum profits, it would make me never sleep again , so not for me.

 

[>Apocalypto<]

Ok, so heres my plan.

I'm going to trade this out over two months of normal seasonal weakness. I'm not actually taking trades, only recording them (paper trading).

Feel free to add any helpful comments.

Heres some guidelines (Got these from Nick's course) and i use them in my trading plan, which is essentially this:

-Capital: 75,000 AUD (i would normally trade CFD's with approx. $30k)
-Universe: Will be my IG Market list that Lesm kindly gave me for the mech system testing. It can go both long and short (most of the time )
-I will attempt to take long and short positions in stocks that present low risk entries using typical chart pattern analysis, incorporating some VSA, and some really primitive EW.
-I will only risk 2% of starting capital on any trade, using strong support/resistance and fixed fractional positioning to determine quantity purchased.
-I will move stops to B.Even ASAP.
-I will use a trailing stop (higher low)
-I will use a profit stop (50% increase in less than 2 bars) to be honest i have not really thought about this allot yet, i am interested in suggestions here.
-Anything i'm missing here?


Cheers,

Can I did not see you write anything about this, but i may have missd it as I am half asleep.

what are you allocating to parcel size. What is your % of total capital for each open margin? will u use 1-2% stop for each separate margin or divide it? what is the total amount of trades to have open at any one time how many trades to be open at once in colirated markets or uncolirated markets?

Will you be shorting against the trend or just on corrections. will your market time frame change for shorts? or will it stay daily?

what is your time frame in each trade will you ride out normal reactions dips or close on them and start again or add to the dips?

Good trading Can

 

[RichKid]

Hi CanOz
Great to see a detailed plan coming into place, I'm still in the process of fine tuning one myself.....I agree with Wayne and Snake about being cautious, bet as small as possible (I like 1% of total equity, you can always pyramid aggressively later) and you will sleep better- psychology is very important to executing the trading plan. Protecting your capital is very important to survival.

I agree about using total equity, I like the way Lally explains it too, Ryan Jones has more to add: reduce your position/bet size as you lose (drawdown deepens) and increase it as you win, but always within the max risk. If you're going to dice up your ac into equal position sizes then as you lose you will obviously have smaller positions as some money would have gone out from the original float- hence the focus on total equity.

Still learning about this myself so do as much research and testing as you can. Mind you, in volatile markets tight stops can have you shaken out quite often so it's good to have sound technical stop levels with position size altered to suit (rather than increasing the percentage risked).

Look forward to seeing how this progresses, I have a lot more work to do on my mm and risk mgmt.

 

[nizar]

Can I did not see you write anything about this, but i may have missd it as I am half asleep.

what are you allocating to parcel size. What is your % of total capital for each open margin? will u use 1-2% stop for each separate margin or divide it? what is the total amount of trades to have open at any one time how many trades to be open at once in colirated markets or uncolirated markets?

Will you be shorting against the trend or just on corrections. will your market time frame change for shorts? or will it stay daily?

what is your time frame in each trade will you ride out normal reactions dips or close on them and start again or add to the dips?

Good trading Can

TI.
I think in this instance parcel size is determined by placement of the intial stop, and the 2% risk.

 

[>Apocalypto<]

TI.
I think in this instance parcel size is determined by placement of the intial stop, and the 2% risk.

Oh ok got it. Cheers Nizar.

Just wondered, I always work to 15% of cap per position.

Good trading guys.

 

[nomore4s]

Yes, particularly if you have a bunch of correlated instruments such as stocks. 2% on an individual position can translate to a lot more on a portfolio level, depending on when positions were entered and so on.

As a simple example (just for the sake of argument) if you entered 5 stocks today, you actually have 10% of correlated risk... not this little black duck.

It might not be totally optimal, but 1% risk suits me too.

On this subject from the point of view of a novice with very limited capital (20K).
I use 1.5%-2% on each position otherwise I find the overall position size is too small to make any decent gains but I do pyramid into postions once the stock moves in the right direction giving me a larger postion size but the same or reduced risk(stop gets moved up once the pyramid postion is taken).

But what I also do to reduce my overall risk is that I only have 2 or maybe 3new positions open at any one time and will not open another position until either I'm stopped out of a trade or it is so far in profit that my stop is well above breakeven. So if I'm stopped out of all my trades at once I'm risking a total of 4-6% of capital. I find it easier to monitor the trades this way as well, and it makes sure I don't overtrade and lose track of where I'm at. By being able to monitor the trades more closely I have found it easier to pick up & learn from my mistakes(and there has been plenty).

Good luck Cana

 

[CFD]

Does anyone know if this is a good idea in relation to trailing stop losses?

However the initial stop loss is set, increase the stop by say 80% of any gain.
ie a stock moves (the right way) by 40c, so you move the stop 32c, leaving 8c to a widening stop.

How well would this support the idea of cutting losses short and letting profits run, ie start with a tight stop loss and then broaden it as the stock moves?

 

[CanOz]

Does anyone know if this is a good idea in relation to trailing stop losses?

However the initial stop loss is set, increase the stop by say 80% of any gain.
ie a stock moves (the right way) by 40c, so you move the stop 32c, leaving 8c to a widening stop.

How well would this support the idea of cutting losses short and letting profits run, ie start with a tight stop loss and then broaden it as the stock moves?

Hmmm, not sure about that one...what i like to do is move to breakeven after the price has moved 2 x my inital stop level in the direction of the trade.eg., if i buy xyz at 100 and place a stop at 80, then once xyz closes at or above 140 i would move the stop to 100.

The trailing stop would follow the trend and if a new high is made it would move to just below the new low.

Thanks everyone for thier input. I will use 1% if the 75k starting capital and scale down as follows:
Start 1%
75000 750 1
74250 743 2
73508 735 3
72772 728 4
72045 720 5
71324 713 6
70611 706 7
69905 699 8
69206 692 9
68514 685 10
67829 678 11
67150 672 12
66479 665 13
65814 658 14
65156 652 15
64504 645 16
63859 639 17
63221 632 18
62589 626 19
61963 620 20

I think i'll put in a pyramid rule, was thinking i would open a new position if the stock breaks out of consolidation...any thoughts on this? The other option is i could risk a greater portion of the capital if the system is showing realised profits.

Eg. if i closed out a trade for a $1000 profit, then that goes into the capital pool eventually allowing and increase in risk to say, 1.5%, then 2% etc...?

Cheers,

 

[CanOz]

Mind you, in volatile markets tight stops can have you shaken out quite often so it's good to have sound technical stop levels with position size altered to suit (rather than increasing the percentage risked).

Thanks RK, and this was a great point which i think made me realise so many losers recently. Nick had mentioned it too, that allot of stops were getting hit lately and wider ranges needed to be used with soild technical supports. In really bullish trends, is it acceptable to use tighter stops with minor support to allow an increase in positon size to take advantage of the conditions? OR is this bending the rules? Could you use this as a seasonal adjustment to the trading plan to take advantage of historically favorable trading conditions?

Cheers,

A note on determining position size.

xzy buy $100, stop at technical support = $95, difference is $5 divided into $750 (1% of 75,000) = 150, i can buy 150 shares of XYZ for $100.00

 

[CanOz]

FWIW - records are very important. Heres a simple spreadsheet i'll be using and posting here on my trades for the next two months.

Cheers,

 

[chrisdedavid]

Hi all, Thanks for comments, so helpful for a beginner (actually not even started) guy like me

Re: 2% ... this sounds ok to me coz that means you virtually have 50 positions, poz size 1.5K, $20 entry $20 exit, so 2.5% roughly goes to fees, so stock must go up by more than that atleast (this is very rough, I know 2% amount will decrease or increase )

Re: paper trading for 2 months
I'm developing a plan now, it involves using advice from professionals and not use chart analysis. "duplicate then innovate" :
and instead of paper trading for 2 months from now... I will simulate trading for 2 months from 2 moths ago till now using archived reports/advice documents.

The reports come from "wise-owl", my judgement so far is that they are good at what they do, and that is all I need... "guidance by professionals" so that I can minimise mistakes made by me as a beginner until making some profits.

2nd stage... Use portion of profits with increased risk vs increased return trades.

Final goal is to be a daily options trader... I've realised this is harder than it looks. The swings are pretty high... too much for me right now

Mistakes
... mistakes were mentioned, I would like to see a forum thread that lists traders real life mistakes, and how they could have avoided or minimized them with sound planning.

 

[chrisdedavid]

Only 4 trades

4 trades at any one time... only!?...Not sure if I understand this correctly.

Does that mean 2% (or 1% now) * 4 running out of 75K capital?

:newbie: