Photo by Patty P.
Continually looking for an easy, meaningful way to write your trading strategy plan? Try using a recipe card to record your strategy system.
Any worthwhile trading plan has four components:
1. Identification of quality candidates
2. Excellent technical entry
3. Trade management
4. Preplanned exits, whether a stop or a target.
Take an index card similar to a recipe card and label the strategy name. An example would be trading long call options or short call options.
1. Quality Candidates.
What are the criteria you have for what you consider a quality candidate? Would daily volume be important? Do you want the stock to have options available? What price range are you considering? What other criteria do you want to use to filter out high quality candidates?WealthBuildersHQ has several subscriptions with high quality candidates which reduces your research time.
2. Excellent Technical Entry
Successful traders have favorite indicators that they use to identify support and resistance. Moving Averages are among the most popular. Rob Roy uses Fibonacci support and resistance to time entries and exits. There are many technical indicators available. Warning: Do Not Get Overwhelmed by using too many technical indicators!
3. Trade Management
Rob Roy uses a 4-3-2-1 System to exit his trade at various profitable points in the trade. When you scale out of a trade, you reduce your risk in the trade by taking profits off of the table. Psychologically, this allows you to stay in the trade longer with the last portion of your trade and the opportunity for a profit runner is more likely. Moving your stop (and you should ALWAYS trade with a stop) as your trade moves in your intended direction is part of trade management.
4. Preplanned Exits
Always know where your stop and your target are before ever getting into the trade. A Stop is your safety net, remember that. If your electricity fails or internet fails, you do not want to be in an unprotected trade. You should have your brokerage trade desk number in your phone as a back-up plan. Trades do not run forever. If you know where the next hesitation point is, you can capture more profits and reduce the amount of risk you have in the trade. Nurture a wealth mindset with a well planned trade recipe.
WealthBuildersHQ is an excellent educational company for learning how to trade stocks, options and futures with many recipes for success.
What is your recipe for success?