In part 1 of this article I described the reluctance of
beginning e-mini traders to formulate and write a comprehensive e-mini trading
plan. Like many things in trading, I suppose that activities besides actual
e-mini trading are perceived as spurious and unnecessary. In part 2 of this
article I hope to convince you that writing a comprehensive trading plan (and
following it) is one of the essential activities necessary for growth in your
career.
Styles of trading are unique from individual to
individual. Like many things in life, no two individuals are going to approach
it in exactly the same manner. We all tend to see and interpret charts in
different ways, and how you abstract information from a chart will influence
your evaluation of potentially profitable trades.
It is important to arrive at similar conclusions about the
potential success of a trade. As a mentor, I have a specific guidelines and
criteria that define a position that is likely to succeed. How the beginning
e-mini trader's perception of chart variables leads to my specific guidelines
and criteria is how I define a traders "style." If I have learned anything in a
lifetime of trading it is this: no 2 individuals see and interpret chart
variables in exactly the same way. I think it is important to note that
differences in styles of perception do not preclude 2 traders from reaching the
same conclusion. The tool that I use to quantify a beginning traders style with
the goal of arriving at the proper evaluation of trades is a written trading
plan.
What sort of things should be a good trading plan
include?
· First and foremost, I believe it is important for an
individual to define, in specific terms, why they are trading.
· A beginning trader should have quantifiable goals;
short-term, intermediate term, and long-term. These goals should have specific
objectives that are realistic and attainable.
· What markets do you plan to trade? Why?
· What entry criterions are necessary to enter a trade? I
prefer of these criterion to be specific and quantifiable.
· How will you manage risk? Some specific methodology for
determining profit targets and stop loss levels should be discussed. Also,
position sizing needs to be quantified and the methodology for the number of
contracts you will trade should be specific. How will you exit trades? When? How
about risk/reward ratios in your trading plan?
· Money management is one of the most important elements
of e-mini trading. What is your money management plan and how did you determine
the components of your money management plan?
· What is your pre-market routine? How will you prepare
for the day?
· I require all traders to keep a journal. How will that
trading journal be structured?
· What tools will you utilize in your trading? This
section should include items like: trading platform, chart presentation style,
indicators and oscillators, third party software, computer hardware, office
location, and office environment are just a few of the many control variables
that fall under the "types of tools" that I utilized in trading.
· What approach to trading is appealing? While it may be
early in your trading career, what setups have you learned to trust? What setups
make you uncomfortable and why?
· At the end of your trading day, what activities will you
engage in to record trades and prepare for tomorrow's trading day? Are there
specific activities that may allow the current days trading to be reviewed?
· A good trader is a lifetime student of trading. How will
you advance your knowledge of e-mini trading in a manner that allows you to grow
and learn as you gain experience?
· Define the discipline you will use in your trading.
Trading can often be a series of steps, a checklist that is used to determine
trading profitability, frequency, and the probability.
· How will you maintain discipline in your trading? What
are signs that your discipline is slipping? How will you "right the ship" if you
run into trading discipline problems?
· What is the Golden Rule in your trading? You may have
several maxims that define your trading. What are these maxims and why do you
have them?
These are just a few questions to help you, as an e-mini
trader, begin the process of developing a coherent trading plan. There are many
other components of the trading plan that may need to be included. The plan is
yours, and should be unique to your trading. Avoid boilerplate type answers and
give real thought to how you plan to trade. You will find that this document
will need to be changed and updated as you grow as a trader. This is normal;
it's good and shows progress in trading.
In summary, I have mentioned the reluctance of beginning
e-mini traders to write a semi-formal trading plan. I hope that this article has
given you some insight into the real value of having a trading plan. I have
included some basic ideas or starting points in the construction of your e-mini
trading plan but warned that these guidelines are not inclusive and there may be
other considerations that need to be included in your plan.
Real Live Trading Doesn't Lie. Spend 3 days with me, in my
trading room, and see if you are one of the many that can profit from a fresh
and unique view on trading e-mini contracts. Sign up for your free trading
experience by clicking here.
Article Source: http://EzineArticles.com/?expert=David_S._Adams
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