The Million Dollar Trading Plan
Warning...Don't trade without it! Legendary stock and commodity trader W. D. Gann make over 50 Million dollars during his trading career, which lasted just 50 years. A million a year, not bad considering that corn never was over $2.80 and soybeans never got over $4.30 a bushel, both often trading under a dollar, during his trading career. You might also take note of the fact that the entire volume per day never got over 10 million shares, for all stock traded on the New York Stock Exchange. The commodity information is mostly his, a few are mine, which I've added to complement his. With 40 years of trading under my belt I can assure you that .....following this list will give your trading career a major boost.
Which Time Frame..... As you begin reading the Million Dollar Trading Plan, consider what time frame you are going to trade. Here are the possibilities, from the shortest to the longest.
You can of course trade more than one time frame, just be sure when you enter the trade which one you plan to trade. The time period that you trade will be determined by the time you have to follow the markets that you choose to trade. The shorter the time period, the more time you need to devote to trading. 1) Follow the trends. This is probably some of the best commodity information a trader can get. Once a trend is established in a stock or commodity it's the traders job to find a low risk entry point so he can take a chunk out of the middle. Don't follow the crowd, learn to be a price trend follower, and when the trend has run its course get out. One of the non technical ways to spot a over bought market is when almost everyone is bullish. By the time that most traders and advisor become bullish the trend is in its later stages. Most traders don't tell you their position until they have a nice profit in it. By that time the best part of the advance is over. 2) Don't fight the trend. Follow it and you will succeed as a trader. 3) Find and use a good trading system, then stick with it. Know why you are in the markets. Is it to make money, or is it for the action. (more on this a little later). There will be a big difference in the amount of money your trading account accumulates. 4) Apply money management techniques to your trading. Money management is as simple as A-B-C, you need only apply it to each trade. A) Know you entry point B) Know where you plan to take profit C) Know your exit if the trade goes against you D) Don't risk more than 10% of your capital on any one trade. Then make sure that your protective stop is not far from your entry point. 5) Follow your plan. Once a position is established and protective stop (ps) is selected the only way you are allowed to move the protective stop(ps) is in the direction of the trade. Then use your (ps) to lock in profits by following the trade and moving the stop in ever closer until either your target is reached or the market reacts and takes you out. Either way you have a profit. 6) Markets go in two directions, learn to trade from the short side as well as the long. Remember markets only advance about 60 percent of the time. The other 40 percent of the time prices are moving down. So learn to trade the short side. Another advantage of trading short is the quick profits. Stocks and commodities go down faster than they go up, almost three times faster. 7) Do not overtrade, not more than 3 or 4 positions on at a time, unless your trading full time and then only if it is for weeks at a time. 8) Never trade without a protective stop in place......NEVER! This is the most important rule there is to protect your capital. Trading without a stop is like leaving your bank roll on a restaurant table and then coming back two hours later to get it. What do you think the chances are that it will still be there? It's ok to leave a position on in stocks or commodities without placing a protective stop....but only if you don't care how much you loose. 9) Take a position only when you know where your profit goal is and where your exit is, if the market goes against you. If you take a position in a stock, know where you expect the market to go.....is it half way back, is it to an old gap, to an old high or low. Have a target, and make sure it is a reasonable target.....one that is inline with the time frame you are trading. As an example, if your trading for 2 or 3 day moves and the half way back point is 12 points away, the odds are against it getting there in 2 or 3 days. (that applies to stocks trading under $50, stocks over that can on occasion make 12 points in a couple days. 10) Trade with the trend, rather than trying to pick tops and bottoms. One way to determine a trend is with a moving average indicator. If your a 1 to 3 week trader, you will be following weekly charts, use a 21 week simple moving average. When the MA is moving up look to take a long position when the weekly price pulls back to the 20 week moving average. 11) Use a system.....use a disciplined trade selection system...an organized, systematic process to eliminate impulse or emotional trading. A stock trading plan with a system click here 12) If your not sure about a trade, don't take it, there will be another along shortly. Same goes once you are in the trade, when in doubt.....get out.... or move your protective stop in close. 13) Make sure you have enough capital to trade. If you have $ 2000 , trade corn or wheat, not soybeans or coffee. 14) Be risk adverse, always make sure your potential profit is two or more times you potential loss. There are commissions and slippage to deal with on every trade, if your are only going for a profit of the same amount that your risking you are not going to make money trading. 15) Avoid emotional trading. Know your entry and exit points as well as your profit target before the market opens. By not having to make trading decisions during market hours you will keep your emotions out of the trade.......emotional traders are losers. System traders, who make their trading chooses when the market is closed are the winners. That is exactly why most day traders don't make it....they are making their trading decisions during market trading hours. You can still day trade, just know where you plan to enter and your target are before the open, and be sure to know where you are getting out if the trade goes against you. If you want to see how the Chicago New York Trading Team does this check out their DayTraders Xpress email service. To get a free trial click here 16) Don't just trade for small profits, there are cost to trading, commissions and slippage. The more trades that go for the big profits the more your account will grow. Hitting singles and doubles are fine, but you need to go for the fences when the situation warrants it. The best way to capture the massive moves is with options. If your an aspiring commodity trader check out the Option Magic trading system. You can trade low cost low risk options and capture some of the biggest commodity moves. 17) Learn to use technical analysis. The fundamental are for the big boys with the deep pockets. Nevertheless, they leave their foot prints in the market place in the form of price charts. Learn to read charts, be a tracker and follow their moves, they will lead you to the money. 18) Losing trades are part of the game; learn to take losses. But learn from them. You don't learn from winning trades, you learn from your losing trades. Just make sure the losses are much smaller than the winners. 19) Jesse Livermore said it best. "Have a losing trade, Forget It"....... " Have a winning trade, Forget It Even Faster" 20) Don't dwell on the losers, find out why it didn't work and if possible, fix it.
21) Trade with a plan - not with hope, greed, or fear. If you find yourself praying that the trade goes your way, your loss is already too big.....get out! 22) Cut your losses short. This is easy, always have a protective stop in place, never ever trade without a stop in place on every trade. That is how you cut your losses short. 23) Let your profits run. Much harder to do, you need experience to know where you can reasonably expect the price to go. If your going to make your own decisions, the best advice is to find experienced traders and learn from them. Get every trading book and trading system you can lay your hands on, just make sure the trader that wrote the book is experienced and knows his stuff. 24) Be sure to keep a trade sheet. Write down where you enter each trade, your profit or loss and why you took the trade and why you exited the trade. Put this in a notebook, and when its filled start a new one. It will help you get a handle on your trades. Analyze your winners and your losers. At the end of each week, if your a day trader, at the end of each month if your a swing trader and at the end of each quarter for longer term trades. This gives you a good perspective. I have somewhere around 70 of those little notebooks filled with information. They are invaluable, do it. 25) There are 3 possible positions to be in at any one time. Long, short or on the side. Each one has its place, and each one is a position. When you are just starting out you will be on the side most of the time. Even experienced traders watch from the sidelines most of the time.....Many times, in fact most of the time it is impossible to to determine whether the market is going to go up or down in the next couple weeks, wait until you do know. If you are using a moving average to tell you the trend, and it is moving sideways, you do not have a trend. Your position should be on the side. 26) Stay fit and eat light. This will keep you feeling at your best. If your not well or feeling up to par don't trade. Take some time off. It's good to take a vacation from trading from time to time. You get new ideas and sometimes a better perspective of what trading is all about. 27) If your getting emotional about your trading, second guessing and agonizing about trades, you either do not have a viable trading plan or you are not following it. 28) Before you can put together a trading system (the plan) you need to learn what makes the markets tick. Learn and study about the markets, find out how to follow the big money. The commodity information you need is there in the form of price charts. Use them along with volume, very important to help you determine the direction of the next price move. 29) Don't have the passion that it takes to be a trader, find something else to do. To be a successful trader you must love what you are doing. If you don't you won't succeed, find out what your passion is. If it is trading, learn everything you can about it. Study price charts, historical charts, daily charts, cycles. Study the works of W. D. Gann, he made over 50 million dollars in the stock and commodity markets. 30) Go back and reread number one, it is the key to making stock and commodity profits. 31) To make a success as a trader you must have control of your emotions. It is absolutely imperative that you are disciplined, you must follow your plan. That means, placing stops for every trade. Once you learn to project where a market is most likely to run out of steam (your target) exit there, often staying just one more day means giving back profits. Often when I tell a trader this, they retort with, I'll just want a little more profit. Well, there have been countless times where a market closes on its high, right at the target, only to gap a point or so lower the next day leaving the trader poorer than if he had taken his profit at his target. 32) Learn to do your own thinking, forget about the talking heads on TV and the hype you will hear in the newspaper..... OR .....Find a good trading service and follow there advice. For a list of newsletters, and information on how to spot one that will make you trading profits click here ...most offer free trials. 33) Make trading a business and you will succeed. Trade for fun and action and you will have fun and action, but little money. 34) When you have a nice profit in your position and the market stalls out, take half your profit and move up your protective stop on the second half. Successful traders learn to take actual profits, (take the money and run), if you don't they will take it back from you. Paper profits are just that. Ask any trader who had make big money in a bull market, he had paper profits, and if he got greedy, he stayed in wanting even more. Of course that trader had lots of paper profits, but without a trailing stop, most gave it all back. 35) There are many many books on stock trading, same goes for commodity trading. No need to learn it all in one day. Decide which time frame you want to trade, then find a nitch or edge, and make that the focus of your trading. 36) A market that is advancing is never to high when it is making higher highs and higher lows. Never short a market like that. There are exceptions, if you are day trading or swing trading. A market that is making new highs is not too high. Just because a market is high doesn't mean it won't go higher. At times markets go up much higher than reason would allow, don't get in front of a market like that. Don't go short a market, just because the price is high. 37) Same goes for a market that is making lower lowers and lower highs. A declining market is never a bargain, just because the price is low. If it is making lower lows, expect it to continue to do so. Many traders have been taken to the cleaners thinking that the price is low and that it must advance from there. Companies go to zero, when they go out of business. Remember buy only stocks or commodities that are advancing....trade with the trend. (38) The markets make patterns which includes individual stocks and commodites. Topping patterns and bottoming patterns and continuation patterns. Learn the patterns and profit from them. Most tarders, even many of the so called experienced ones, forget to watch volume as the pattern unfolds, always relate volume to price movement. 39) There are now hundreds of indicators and studies that traders follow. Yet nearly all are calculated on the price. There are only so many different ways you can manipulate the numbers. There are only a few you need to apply. Don't use lagging or coincidental indicators, they will get you in and out at the wrong times. Exception is in a strong bull or bear market. Use leading indicators and learn to anticipate the next couple of days action. With a little study, you can take a lagging or coincidental indicator and make it into a leading indicator which will put you in just as a major up thrust is about to occur. Same goes for the down side. 40) Price and price patterns are good indicators. Don't neglect them. They can give you the first clue to the next price move. That goes for daily, weekly and monthly price data. 41) A good way to learn the way stocks and commodities trade is by using a trading simulator. This one contains a system for trading the stock indexs, S&P futures etc. It'a great learning tool find out more.
Traders Edge Publishing
|