September 20, 2015

Simple Trading System Update

Good afternoon and Sunday everyone. I just wanted to post a quick update to highlight the many refinements I've made to my simple trading system. I've tried my hardest to condense and simplify as much as possible because it's very difficult for me to keep track of all of this stuff while trading. The more I can condense and simplify, the more I can remember and apply in trading every day. Let me know your questions or comments below, thanks!

Trade Process
Journal thoughts and emotions (context, sup/res, MMs, BO follow-through vs reversal pressure)
Trade the Best Setups (trading range reversal, BOPB, spike BO swing, trend PB)
Plan your trade (context, risk, targets, trade management plan)
Trade your plan (become systematic and rule governed intuitively, can always get back in)

Technical analysis
1. Context to the left (pattern), bet this continues
Trends are either in:
2. Trading ranges, then bet AGAINST trend traders, BLSH scalp
Trade reversals near top/bottom
a. get in where trend traders get out, especially if they had a great buy signal bar
b. get in where trend traders get in, especially if a great buy signal bar
3. Trends, then bet against reversal traders, scalp and swing
Trade with trend, don't trade reversals
a. get in where reversal traders get out, especially if they had a great sell signal bar
b. get in where reversal traders get in, especially if a great sell signal bar
4. Always-in direction (long or short)
5. Follow-through vs Reversal pressure

Risk
Initial Risk (swing H/L or signal bar)
Actual Risk (signal bar or entry bar)
Trade Management Risk (immediate two bar reversal, trailed swing Hs/Ls, or strong trend bars)

Targets
Trend Spikes/Breakouts
MM target based on height of the spike
Trend Channels or Trading Ranges
1st entry, 2R target+
2nd entry+ or excellent 1st entry signal bar, 1R target+

Patterns and Rules
Trend Spikes and Strong Channels (consecutive trend bars, little overlap, strong closes)
Bet trends succeed and reversals fail

Trading Ranges and Weak Channels (overlapping bars, many reversals, wicks)
Bet reversals succeed and trends fail at top/bottom of ranges

Always-in Direction
If you had to enter right now, would you go long or short?
Changes when major trendline breaks or after several bar spike reversal

Signal Bars
Good for the bulls (strong bull trend bar closing near the highs, small or no wicks)
Good for the bears (strong bear trend bar closing near the lows, small or no wicks)
Bad for both (doji bar, big wicks)

Positive Trader's Equation (1R vs 2R vs swing)
Low probability setup - uncertain trade - 2R target minimum
High probability setup - good looking trade - 1R target minimum

Support/Resistance
Importance is a function of times tested
HOD/LOD, daily, weekly, monthly
TLs, TCLs
MMs

"The ONE Thing" book ideas
#1 Master one trading niche and build progress one small step at a time
#2 Set a trading routine, stick to it, set punishments if you don't
#3 Find fun outside of work and trading

Other Notes
Use “I don’t care” share size to trade objectively. "I'd rather be rich than right." -ModernRock.
The market has inertia and tends to keep doing what it has been doing.
Accept that trading is hard and comes with guaranteed losing trades (at least 30% of trades or more).
Stop caring about making a ton of money. Care about having fun, analyzing charts, and reviewing trades.

Best of Al Brooks Videos
Entries and Stops 
Probabilities and Actual Risk
Price targets, Initial risk, and Actual risk 
Always-in and Stops

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