Trading Plan: Writing Instructions For Yourself

Yes No Logic

Writing a Trading Plan is really not that hard, the problem is that Traders tend to leave out small but important information. And that leaves plenty of opportunities for mayhem. To make this simple, I thought I’d propose the following:

Instructions for a Million Pound Account

You are about to go on holiday and you need to get your a friend to trade a £1 million account on your behalf, he has no trading experience but he knows how indicators work. Write to him a set of clear instructions based on your trading rules. Ideally it should be a step by step instruction and you MUST keep it really simple. Example:

  • Step 1. Divergence – yes/no? if yes, see 2
  • Step 2. Near horizontal – yes/no? if yes, see 3
  • Step 3. Is there at least 2 of follwing? eMA, Pivot Point, Trendline. if yes, see 4

And so on…

If there’s a NO at any stage, he/she must walk away and not trade. You also need to remind him/her that the instructions work on a series of trades to be profitable and that is a random occurrence, so he must take every trade.

 

Get a friend to review those instructions, if at any point he/she does not understand what you wrote, then review and rewrite it until it’s clear and simple.

When you’re done, take the same set of instructions and frame it up, leave this in front of your work desk as this can now be your own Trading Plan.

If you can’t follow simple instructions, that’s probably just the wrong state-of-mind a.k.a. psychology. However, if you don’t have clear instructions, that’s just poor planning and less of psychology, more importantly, that is just the best opportunity for you to FORCE a low probability trade.

This process should help identify the difference between psychology and poor trading plan.

Anyway, hope the above gives you a method of writing a better Trading Plan.

 

Thank you and happy trading!

 

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