Oct charts, page-18

Thanks @Fid & @milesy for sharing your thoughts on a trading methodology.
If anyone else is interested in sharing their “plan” I would also love to read their thoughts.
Trading to a plan is probably one of the things that is rarely discussed on HC.
So here is mine.

My own opinion of course is that charts are essential to the trading plan, as from a statistical & technical point of view they can at the very least show when NOT to enter a trade, a potential target & when to think about an exit.

What is NOT a trading plan?
Buying a stock based on a stockbroker or a HC poster’s recommendation is NOT a trading plan.

So,what is a trading plan?
Well I guess for me it is a calculated plan that is put into effect after the initial decision to trade or invest in a stock based on some sort of selection criteria that should include a combination of an assessment, in no particular order of the fundamentals and an in depth analysis of the chart.

These would include but not be limited to looking at the historical patterns & locating the closest support & resistance levels. An eyeball of the Monthly, Weekly & Daily charts which show at least one momentum indicator & the volume.
The next & arguably the most important part would be how much do I have or want to invest & what amount of that I am prepared to risk.

The spreadsheet to calculate my plan is divided into three parts.
The trade size calculations, the entry and the trade monitoring & exit.

After working determining the basic info from the chart, that & other factors are entered into the spreadsheet to calculate the trade size, initial stop loss & other things that I consider to be important to know.
After calculating the trade size & then entering that into the Entry section, I can then calculate the profit/loss and/or an exit strategy to sell all or a portion of the trade once in profit to recover the initial cost. That can be useful if the plan is to accumulate.
If I am happy with the result I will pace an order at the level I have made the calculation. Then sit back & wait.
If I get the order I will then place the sell order.

The spread sheet can calculate different trade size scenarios based on what I select as the trade size options in the first part of the sheet.
The monitoring & exit calculations are also changeable based on what is selected working down through the sheet.

The spreadsheet looks bulky & it might seem time consuming & a waste of time & effort but it takes less than 5 minutes to fill in & gives me a clear picture of the what ifs of the trade.
It is also a record of what I did & thought at the time of the trade.

The two examples below shows a couple of scenario’s if I had bought PSY on Friday at the low.
One is if the trade turns sour & eventually reaches the initial stop loss level.
The second shows what might happen if/when the sp again reaches the top of its trading range.

The logic behind entering the trade now as against an entry later when the sp has moved higher into the trading range is obvious. The main reason though is there is less risk if the sp continues to slide.

The assessment of the chart is that there is a lot of ongoing accumulation & support in the lower half and some selling/ blocking in the top half of the range. The top half therefore is the logical place to sell some or all the trade.
If wanting to buy, the chart is showing that an order could have been placed some days ago at the base or just above in anticipation of the sp falling to that level.

Another part of my trading plan is having the conviction that the majority of my assessments on the chart are going to be right & then just sticking to it. The sticking to it bit is probably the hardest part of the lot imo.
Despite my convictions I still do dumb arsed things sometimes.
Last week I entered a trade in another stock I had been sitting in line for 4 days waiting for the sp to come back to where I had reckoned it should.
I got sick of waiting & changed the plan and entered higher only to have the sp come down 2 days later to the level I had been sitting at for 4 days.
In my defence though it took two days to get filled & it has not affected the plan to any large extent.

Any way the point is, with a trading plan, trades can be pre calculated based on the charts & orders placed in advance. (both buy & sells) And the risks are clearly visible & easy to understand.
Weather one stick’s to the plan is up to the trader but I think it is pretty important to at least have one.

Comments and other plans welcome.