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Comment: A wiki makes a great choice for the development of content. I will use this wiki area to develop my stock trading plan. One of the most important aspects to trading is to write down a plan for how to do trading. This turns it into a discipline, and avoids costs that come from not being disciplined. This includes the latest version of my trading rules (which may need to move to their own page). This is a work in progress. Hopefully you will enjoy visiting periodically to see how it develops. According to the OTA course, this plan should NOT be modified during the trading day, and ideally only once every several trading days, after the rules have been given a chance to demonstrate that they actually work. For now, I am still busy writing the rules according to what I remember from the course last week, and am doing some limited trading to remind myself of the issues that need to be considered, and making notes about what issues I need to review for a deeper understanding. |
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Trading Plan
Philosophy
My philosophy is to learn a variety of profitable stock market trading techniques, in order to be prepared for a variety of market conditions, and generate steady income. Additionally, I want to learn enough trading techniques to be able to teach others how to trade successfully. In support of these goals, I will work to document my trading and learning process.
Types of trading I want to learn:
- short term swing trading
- short selling techniques
- high speed momentum trading
- automated trading strategies
General Goals
Goals generally need to include a timeframe, or schedule, for completion. Otherwise they are simply a todo list, or may never be acted on. At this point, however, my main commitment is to documentating the trading plan itself, not so much to guaranteeing commitments to time frames within the plans. So the initial goal is to record all the goals, determine reasonable time commitments, and then divide the time among the goals to create a schedule.
Profit and loss targets
OTA style trading - daily profit and loss
- Average Daily Profit Goal
- $10 per day by July
- $50 per day by October
- Daily Win Limit
- $100 until July
- Stop loss
- $100 maximum loss per day
- $250 maximum loss per week
- $1000 maximum loss per month
- Account size: $5000 buffer over PDT limit
Timothy Sykes style short trading - daily profit and loss
Can not predict the number of trades per day or month. So this seciton sets per trade goals.
- Share size calculated for $100 profit at projected share price target
- Profit target: $100
- Loss target: $50
- No more than two simultaneous trades per day
Metrics
- Determine metrics to track for trading, and schedule and time commitment to maintain metrics
- Daily profit logging
- Winning trade percentage - daily, weekly - segment according to trade type: OTA, Sykes, Experimental
Number of stocks to trade
- swing trading
- Specialize: AKAM
- Learn action of 3 other stocks: CSCO, Intel, COST
- high speed momentum trading
- Identify candidates - Possibilities: Russ Allen's wife favorites, XLT examples
- Timothy Sykes
- Determine how to apply S&R - Consider purchasing "Tim Fundamentals" course
Business organization
- Transition to trader in securities. Todo:
- Arrange meeting with tax advisor
- LLC in conjunction with current corp
- Arrange meeting with tax advisor
Education
Goals need to be time targeted. Need to determine time frames for completion of the following
Courses Completed
- OTA Professional Trader 1 & 2
- OTA Platform Immersion
In progress
- Index for OTA videos
- Complete notes for OTA videos
- Finish OTA 16 disks of flash based stock trading courses, and notes
To be scheduled:
- Regularly visit local OTA office - at least once a month.
- Regularly scan course list
- Schedule additional OTA courses purchased with passport
Books
- Type in all strategies from recently purchased trading book
- Restudy Elder, especially method of calculating stops
- Money making candlestick patterns - attempt to replicate results
Developing education material
- Develop MP3 audios of relevant portions of OTA videos
- Need to develop my own training materials
Operational and business maintenance
Create specific plan for the following
- Backups and archivings - trading machine, trading notes
- Updating all tradestation computers with latest software: HDX, gigabook, lifebook, sony
- Reviewing trade statements
- Decision whether to cancel etrade
- Tradestation maximum commission? 1000 shares is $8
- Develop MP3 audios for trading
- Purchase wifi
- Give OTA rebate number to tradestation
Other tasks:
- Install purchased candlestick indicators in all copies of tradestation
Trading Rules
RULE: For each day's trade log, make a copy of the current trade rules to that day's trade log (trade diary) page. Record violations and reasons for violations. Amend the todo list on this page according to experience. About this copy of trading rules according to deficiencies discovered. When processing todo items into new trading rules, create a wiki page to document the research process justifying the rule change.
- TODO for trading rule changes
- Find set of 3 moving averages for 5 minute chart that Russ recommended in OTA course
- Learn how to include MACD in list of indicators
- Modify trading rules when to include different indicators based on market trend, vs. market chop
- Consider when to use Fibonacci
- Document what to do with timalerts
- Document stock selection rules: Right now, just follow AKAM. After rules more finished, setup radar screen to scan for OTA criteria stocks
- Document TRIN & TICK recommendations from OTA video course
- Document allowed trading times
- Document gap and gap fill behavior as an indicator
- Document volume confirmation
- Document profit preservation rules for stops and switching to trailing stops
- Document Bolinger bands for exits from trading strategy (opposite band reversal signals exit)
- Based on Trading Diary - Garnet - 2009-04-30 update trade entry template with profit/loss, indications, rule violations, etc.
- Document commitment, and schedule, for training:
- follow OTA XLT high speed momentum intraday trading course, both in real time and reviewing past recorded sessions
- Timothy sykes materials
- Books
- Progress on current strategy book
- Put excerpt summary of daily trades on trade diary page, and include excerpt in notes table below.
- document special rules for etrade account: Because of $8 commission: Consider no trades under 500 shares, or use only for timalerts, or some other special trading such as multiday swing trading
- Get rid of wall street survivor paid account
- Review primary rules from class, make sure template emphasizes them first
- Before trading
- Check computer is operating properly
- Check internet connection responding reasonably
- Prefer SprintPCS internet connection for trading if adequate performance
- Open tradestation
- Load HDX-Second workspace
- AMEND: Need to consider rules about saving workspace at end of day as a form of diary, screenshots, etc.
- Before entering trade
- Chart must have these items:
- Use 5 minute chart
- Must draw recent support and resistance lines for today, and for lines at least 5 days back -
- Short term - 5 min(5 days), Long term - 60 minute(300 days)
- Try to have at least 3 lines above and below current price
- Indicators:
- Must know ATR
- Include TRIN/TICK
- at least one market $INDU(Dow) or $COMPX(Nasdaq)
- 3 moving averages (8,20,50) colored Red(fast),Green(medium),Blue(slow)
- Must look at market direction
- Include trin and tick in market direction prediction
- Use position sizing worksheet to calculate maximum share size for current price of stock to be traded
- Consider short when stock is dropping from resistance resistance, consider long when stock is rising from recent support
- Chart must have these items:
- Trade rules
- Size: 100 shares limit on initial order
- Trade must document these items: (Preferable before trade, or must be done immediately following establish stop market)
- Justification of direction of trade:
- Must have more than one confirmations, and must note any contra-confirmations
- indicators, market direction, stock action, apparent market correlation for today
- Profit exit target
- Profit target should be based on distance to just before next support or resistance
- Loss exit target
- Loss target should be 1/3 to 1/2 of profit target.
- AMEND: Need to right rules of how to consider ATR in setting profit and loss targets
- Loss target should be 1/3 to 1/2 of profit target.
- Justification of direction of trade:
- Trade entry
- Check water consumption - Consume 1.5L of water during trading day
- Primary criteria:
- May only enter trades in direction of market
- For sell short - Must be dropping from near (at or below) recently tested resistance
- For long - should be rising from near (at or above) recently tested support
- May only enter trades in direction of market
- Must immediately establish stop market, preferably with OCO/OSO type order at entry
- Stop market
- Must never move to allow increased loss after trade entry
- May be tightened at any time
- Size to 1/3 of profit potential, but can be as low as 1/2 in some cases
- when pyramiding, must tighten stop market - i.e. move stop market to preserve profit (or at least break-even) on previous shares
- Trade rules for increasing share size in an active trade (pyramiding profits)
- May start pyramiding additional shares if:
- Pyramiding may not increase original allowable net loss
- Stock goes in correct direction
- move stop order to be same distance from new average share price.
- May pyramid 100-200 shares on first pyramid, 300 shares during second pyramid of original trade, if total number of shares does not exceed position sizing
- If stock goes slightly in wrong direction
- may pyramid if
- market and indicators more strongly confirm trade direction
- Must do this:
- Only pyramid of 100 shares allowed
- If pyramid is done - do not move original stop
- may pyramid if
- May start pyramiding additional shares if:
Template for new stock trade:
- Time: Symbol: ???? Price: .
- Chart: minutes
- ATR(14,14): currently usually
- Resistance lines: nn.nn nn.nn nn.nn
- Support lines: nn.nn nn.nn nn.nn
- Moving averages: trend / order / position relative to stock
- Market direction: Up/down dow +/- nasdaq +/-
- TRIN: n.nn (trend) TICK: nnn (trend)
- Account: TS / E / SIM
- Indications
- Market direction (gaps?, time of day patterns)
- general trend of stock
- correlation with market? stronger/weaker
- action relative to support and resistance
- volume?
- Bolinger band action
- Fast, Med, Slow moving averages action
- MACD
- Rules broken
- Stock action after trade:
- time - action
- time - action
- Final exit: P/L this trade
- Cumulative P/L today:
Trading Diary
This section documents trade diary for each trading day. Elder suggests recording where trading ideas come from with each trade. I am going to record profit from Tim Alerts trades separate from my OTA trades. Probably I should also tease out my "experimental" trades and record them separate from my by the rules OTA trading. For now, I'll record the difference in comments.
