My first trading plan

[Warr87]

Hi all,

This is my first trading plan and welcome feedback.

Goal: survive while I learn, and hoping earn min. 15% p.a.

How: swing/momentum trading, in the medium (or short if a quick profit can be taken). Happy to hold positions for longer to ride the trend as well. Happy to hold trades for a couple of weeks or months.

setups: I am thinking ascending triangles, or other BO patterns (wondering what I should be focusing on here).

Scans: not sure on the best way to screen for these potential setups. Just got amibroker and managed to get a code to run basic pennents/flags/triangle scans.

Money management: risk 1% per trade. maximum position size to be limited to 25% of capital.

Risk management: No more than 6% at risk at any one time. Intend on moving my stop-loss to breakeven whenever possible to limit exposure.

Trade management: No solid plan on determining hard exit right now. ISL will be moved to BE point and then once I get to 1.5R I will adjust with trailing stop.

Entry: after identifying potential breakout and/or continuation, buy at next day open.

Exits: Will place sell orders for target amount to ensure certain profits are made. I think a 3ATR for a trailing stop may work, but still haven't narrowed down an exact system to trade with, therefore entry/exits haven't been put in stone.

I have started paper trading to get my feet wet. My initial capital will only be $10,000 (or possible $15,000). I don't intend on using leverage until I can prove to myself that I can trade without going broke. With such a small account I know I am very limited. Will be adding to account as I go.

I have amibroker as well, which I am hoping to use some backtesting. I am getting to know the system, but it is overwhelming given its breathe. The learning curve seems steep.

 

[willoneau]

Hi Warr87, welcome you will learn heaps given time here.
if I may

How: swing/momentum trading, in the medium (or short if a quick profit can be taken). Happy to hold positions for longer to ride the trend as well. Happy to hold trades for a couple of weeks or months.

will you be swing trading , momentum trading or trend trading? starting with one first and getting to know it is good start. You might find once you know yourself which style best suits you.
We all have things about ourselves that can jeopardize any trading system, learning about them as quickly as you can and finding ways to cope with them speeds up the learning curve to consistency.

 

[Gringotts Bank]

Hi all,

This is my first trading plan and welcome feedback.

Goal: survive while I learn, and hoping earn min. 15% p.a.

How: swing/momentum trading, in the medium (or short if a quick profit can be taken). Happy to hold positions for longer to ride the trend as well. Happy to hold trades for a couple of weeks or months.

setups: I am thinking ascending triangles, or other BO patterns (wondering what I should be focusing on here).

Scans: not sure on the best way to screen for these potential setups. Just got amibroker and managed to get a code to run basic pennents/flags/triangle scans.

Money management: risk 1% per trade. maximum position size to be limited to 25% of capital.

Risk management: No more than 6% at risk at any one time. Intend on moving my stop-loss to breakeven whenever possible to limit exposure.

Trade management: No solid plan on determining hard exit right now. ISL will be moved to BE point and then once I get to 1.5R I will adjust with trailing stop.

Entry: after identifying potential breakout and/or continuation, buy at next day open.

Exits: Will place sell orders for target amount to ensure certain profits are made. I think a 3ATR for a trailing stop may work, but still haven't narrowed down an exact system to trade with, therefore entry/exits haven't been put in stone.

I have started paper trading to get my feet wet. My initial capital will only be $10,000 (or possible $15,000). I don't intend on using leverage until I can prove to myself that I can trade without going broke. With such a small account I know I am very limited. Will be adding to account as I go.

I have amibroker as well, which I am hoping to use some backtesting. I am getting to know the system, but it is overwhelming given its breathe. The learning curve seems steep.

There's a few issues to iron out. As will said, you have mentioned 3 or more different styles of trading in the one post. Decide on one, define it as best you can, see if you can locate the set ups programatically, then worry about stops/exits etc.

AB takes forever to learn if you aren't already familiar with coding. So you either take the time to learn it or pay someone to code your idea. It sucks, but that's the reality. Sometimes you can get lucky and find something you can use in the AB library to get started.

 

[willoneau]

I totally agree Gringotts Banks , as i carn't code so paid for it and tweaked it to suit my style. If systems is the way he will go, tech/a is discretionary but has done systems so personal style needs to be found. Also Peter2 has another style of trading that suits him and works well for him.
What type of trader/ investor are you if you don't mind me asking?

 

[willoneau]

Great plan Warr87, if you don't mind I'll like to put my spin on it.
Goal - to be consistently profitable trader.
Survive - paper trade systems to find edge and positive expectancy or reduce capital to live trade and learn about psychology.
Entry/setups - part of system development, paper trading and back testing.
Scans- using amibroker you can create a simple scanning algo to locate possible candidates once system in place. eg plenty on net if not learning programing.
Money management / Risk management - go hand in hand and work together , plenty of threads here about them.
Exits - can of worms, many ways to to do this and every way has it's good points and bad . The style of trading usually determines type of exit or exits you use.
Entry is easy just press the button, exit is the hardest thing to do. But once you become a consistently profitable trader it is as easy as the entry with a press of the button.

 

[Warr87]

Thanks for the comments all.

will you be swing trading , momentum trading or trend trading? starting with one first and getting to know it is good start. You might find once you know yourself which style best suits you.
We all have things about ourselves that can jeopardize any trading system, learning about them as quickly as you can and finding ways to cope with them speeds up the learning curve to consistency.

I should have been a bit clearer. I will be trading with the trend, and I also left out that I will only be going long.

As for swing v. momentum trading, while I have read the differences I often just think it is semantics. I don't place much of a difference. I know with swing I would widen my stops and make sure I don't get stopped out with volatility and let it pull back and continue. I would be more on the swing side, as opposed to momentum side, given that I want to ride it on the way up. My scans will be looking for potential breakouts too, so I believe I will get a lot of momentum trade opportunities. I will be discretionary in my style, though I want to apply some mechanics to aid in these decisions.

AB takes forever to learn if you aren't already familiar with coding. So you either take the time to learn it or pay someone to code your idea. It sucks, but that's the reality. Sometimes you can get lucky and find something you can use in the AB library to get started.

I am familiar with some programming so its not totally foreign to me. I will likely need to seek some help though once things get complicated. Even if I pay someone to code it for me, I will still learn. I like to know how things work (especially when its my money on the line).

I am loving AB so far.

What type of trader/ investor are you if you don't mind me asking?

In what sense?

I am ok with some risk. I have gone through 20% draw downs before (but obviously didn't like it). I think through and try and be methodical in how I approach things. My inclination is to go long (I think I would need to adjust a lot to a short based system).

Great plan Warr87, if you don't mind I'll like to put my spin on it.
Goal - to be consistently profitable trader.
Survive - paper trade systems to find edge and positive expectancy or reduce capital to live trade and learn about psychology.
Entry/setups - part of system development, paper trading and back testing.
Scans- using amibroker you can create a simple scanning algo to locate possible candidates once system in place. eg plenty on net if not learning programing.
Money management / Risk management - go hand in hand and work together , plenty of threads here about them.
Exits - can of worms, many ways to to do this and every way has it's good points and bad . The style of trading usually determines type of exit or exits you use.
Entry is easy just press the button, exit is the hardest thing to do. But once you become a consistently profitable trader it is as easy as the entry with a press of the button.

Thanks! I thought I was being thorough with my first plan, but I like this spin (interpretation). Even just paper trading has made me realise I am not as consistent in what I am after (not that too, though ). Being consistently profitable is definitely the goal!

 

[willoneau]

Hi Warr87,
What type of trader/ investor are you if you don't mind me asking? was actually for Gringotts Banks

 

[willoneau]

As for swing v. momentum trading, while I have read the differences I often just think it is semantics. I don't place much of a difference. I know with swing I would widen my stops and make sure I don't get stopped out with volatility and let it pull back and continue. I would be more on the swing side, as opposed to momentum side, given that I want to ride it on the way up. My scans will be looking for potential breakouts too, so I believe I will get a lot of momentum trade opportunities. I will be discretionary in my style, though I want to apply some mechanics to aid in these decisions.

Excuse my ignorance as i don't see what you mean by semantics with reference to swing trading and momentum trading. As i am aware and could be wrong , they are totally different trading styles and have different systems to trade them.

 

[willoneau]

I am ok with some risk. I have gone through 20% draw downs before (but obviously didn't like it). I think through and try and be methodical in how I approach things. My inclination is to go long (I think I would need to adjust a lot to a short based system).

Finding your risk profile is challenging and once you know, it is helpful. Being methodical is a great way to be both in trading and analyzing your trades afterwards. Tech/a and peter2 are both discretionary but approach it with strict methods.The shorter the time frame system the harder to learn and not always necessary, finding out your trading profile will probably point you into the direction best suited for you.
Well done on your ETF trading as it is something i have steered my daughter into recently on a long term wealth creation path.

There are many here who are willing to help those along the long path to consistency in trading and there are many paths that can be chosen to take. I am no were near the intelligence or experience for some of the consistent traders that come here to help but i always listen and find true nuggets of gold in what they say.

 

[Gringotts Bank]

You don't have to trade a system to be successful. You can trade on gut feel, FA, astrology or tea leaves. ALL that matters is your equity curve. It's quite possible to have a beautiful equity curve by following the taxi driver's tips. Find a style that suits you and works for you. Systems afford great advantages (advantages that appeal to me personally), but it's not the be-all-and-end-all, and it certainly doesn't suit everyone. There's a few highly successful traders on HC who trade disc.

 

[willoneau]

Hi Gringotts Banks, i agree totally at the end of the day it is your equity curve that determines how successful you are.
Ps i did point out tech/a and peter2 were discretionary traders to my knowledge anyway.

 

[Warr87]

You don't have to trade a system to be successful. You can trade on gut feel, FA, astrology or tea leaves. ALL that matters is your equity curve. It's quite possible to have a beautiful equity curve by following the taxi driver's tips. Find a style that suits you and works for you. Systems afford great advantages (advantages that appeal to me personally), but it's not the be-all-and-end-all, and it certainly doesn't suit everyone. There's a few highly successful traders on HC who trade disc.

I think a system just helps with consistency, and when drawdowns are occuring, help you to stay in. So far I have focused more on fundamentals: choosing a company I believe in, in a sector that I believe will go up in the future, and something that will at least give me better dividends then the bank. So far this has done me well, but since looking into technical analysis I like the idea of using systems and metrics to help me choose more wisely.

I plan on using a system to help chose entry/exits, good risk management, etc., but I will still use discretionary means. At the end of the day it is my money so as long as my actions are reasoned, I don't see much of an issue with discretionary.

I have also spent the last couple of days doing a lot of Amibroker work. I finally managed to get a bunch of indexes loaded in, create some ticker lists for the ASX20, 30, 100, 300, 500, All Ords, Small Ords. Also managed to code a few systems with the help of youtube. Still a number of things I am not sure on, but I am learning so I am happy.

Excuse my ignorance as i don't see what you mean by semantics with reference to swing trading and momentum trading. As i am aware and could be wrong , they are totally different trading styles and have different systems to trade them.

I just meant that they seem, sometimes at least, to be the same thing. So if it's semantics, its more just about a difference of definition. But I guess my distinction of them is blurred since I intend on using continuation patterns to use for a swing trade, which would also be the same kind of thing a momentum trader would use.

 

[Trav.]

@Warr87 you are on the right track and there are many resources here to assist in your journey.

I have been thinking about creating a checklist for myself prior to entering a trade and found the below as a really good starting point.

What is the direction of the overall market?
What is the direction of the various market sectors?
What are the weekly and monthly charts showing?
Are the major, intermediate, and minor trends up, down, or sideways?
Where are the important support and resistance levels?
Where are the important trendlines or channels?
Are volume and open interest confirming the price action?
Where are the 33%, 50%, and 66% retracements?
Are there any price gaps and what type are they?
Are there any major reversal patterns visible?
Are there any continuation patterns visible?
What are the price objectives from those patterns?
Which way are the moving averages pointing?
Are the oscillators overbought or oversold?
Are any divergences apparent on the oscillators?
Are contrary opinion numbers showing any extremes?
What is the Elliot Wave pattern showing?
Are there any obvious 3 or 5 wave patterns?
What about Fibonacci retracements or projections?
Are there any cycle tops or bottoms due?
Is the market showing right or left translation?
Which way is the computer trend moving: up, down, or sideways?
What are the point and figure charts or candlesticks showing?

After you’ve arrived at a bullish or bearish conclusion, ask yourself the following questions.

Which way will this market trend over the next several months?
Am I going to buy or sell this market?
How many units will I trade?
How much am I prepared to risk if I’m wrong?
What is my profit objective?
Where will I enter the market?
What type of order will I use?
Where will I place my protective stop?​

 

[willoneau]

Hi Trav, with all those questions what if half say bullish and half say bearish do you still take the trade?

 

[willoneau]

Which way will this market trend over the next several months? Predicting
Am I going to buy or sell this market? part of system should know
How many units will I trade? money management so also should know
How much am I prepared to risk if I’m wrong? Risk management will know with relation to money management
What is my profit objective? already part of system should know
Where will I enter the market? system will know
What type of order will I use? depends on entry criteria in system
Where will I place my protective stop?system rule

if following either discretionary or systematic method these question will already have answers.

 

[Warr87]

I think over most of those already. But that is also because I am trying to find what method works for me. I put in fib retracements, but these won't hold for every chart. So perhaps adding something else. There are a ton of different indicators to use and they won't work for everyone. I'm still trying to find what best works for me. But I do like your list (My mental list is a lot smaller though).

Over the weekend I tried few SMA crossovers which seemed to work well. I want to see if i can optimise and see what would work best. I am also thinking of adding in a trailing stoploss of 2 * ATR(14) but will look at what is best optimized for that too. So far my exits have been discretionary based on drawn trend lines. I can't code that in AFL I don't think which means I can't code my fixed fractional method properly. But I am amazed at how well a cross over works in my back testing. I might do a separate paper trade for this to see if i can make it work for me in real time.

 

[willoneau]

Hi Warr87, if you don't mind me replying i am a little different in thinking about what you have brought up which might upset some here.

 

[willoneau]

Warr87, I think easiest place to start is money management, my interpretation of Fixed fractional
20 positions, 5% in each eg $20000 capital = $1000 worth of stock in each open trade.
So at this stage if any one stock becomes delisted you lose 5% of your capital, true but rare as a system usually gets you out before that happens.
Risk - usual risk suggested is max 2% of any open trade. If you place your isl (initial stop loss) say 50% below your purchase price then you are risking 2.5% on that trade. (just an example)
you will find your own way of placing your ISL just make sure less or same as the 2% rule.
Money management great place to start and once followed consistently increase the time which you need to find the way for you to become a consistently profitable trader.

 

[willoneau]

Warr87, any way you choose to pick a stock should be recorded in detail so you can review it down the line and hopefully find points to improve your trading both when they are winning but more so when trades are losses.

 

[willoneau]

Warr87, how do you want to trade/invest? From your post i'm thinking technically?
SMA crossovers don't work only in hindsight, will crucify you in sideways markets.