TRADING PLAN Trading Philosophy / Trading Psychology: I believe that Financial Markets are 100% psychology driven. Price patterns are a reflection of the collective psychology of a large number of traders. Trading psychology also a major factor in my own trading. It is identified as my trading state. Fear and Greed are powerful enemies to profitable trading and I can overcome this by training my subconscious mind to be focused on following a defined trading plan versus focusing on wins and losses. I am a disciplined trader committed to trading only for profit strictly adhering too my trading rules, plan and standard operating procedures. My style of trading is aggressive with my preference to trade directional, and pattern set ups. I will trade full time as a day trader and also seek other trading opportunities especially dealing with Options. I will not have a bias as to where the market may or may not head, I will react to the price, patterns and my tools as they present themselves applying my trading rules. I trade what I see Not what I think! I understand that I cannot control the market, I can control only myself. My trading state and mindset is the key to the success of trading. I must be rested, fit, healthy and mentally alert. Accepting the stress of trading by keeping focused, calm, disciplined and not distracted is essential for being a professional trader. Losses are acceptable, not desirable but I can minimize them with compliance to the rules, especially avoiding impulse trades and never being in a trade without a plan or a stop. Trading is a business and I am here for the profit. Golden Trading Rules: Check for Stops and targets resting in the Market then update or remove them. Look left for previous structure. Always Set a Stop Loss. Always! Maintain Discipline. Avoid impulse trading. Trade with a plan and stand by the rules. Identify, Predict, Decide and Execute (IPDE). Do not enter a market within 15 minutes after a news event. Get S.E.T. (Stop, Entry, Targets) before every trade. (Know where and how to Exit ) If I lose my ISP then call my Broker immediately and go flat, then work on the technical challenges to get back online. Keep it simple.
Money Management, Risk Reward and Financial Goals: I will trade 4 contracts as a unit maximum for the S&P e-mini. I will trade 3 contracts as a unit maximum in the Russell e-mini. For every $5K that I add to my account I can add a contract to a unit. If I reduce my account by $2K then I will reduce the contract size. Commissions, fees, charting services, continuing education and other business related costs are considered essential to trading. Risk to Reward is preferred a 2 to 1 ratio, but waiting for the set up and trading the rules is paramount and given the opportunity this standard is a guideline. My goal is to successfully net 9 combined points per week in the market. My desire is to train for the FOREX so that I can diversify looking for the best opportunities as I see them. Daily Routine I will only trade on days when I am well rested, relaxed and not mentally distracted by matters that will divert my focus. I will spend at least 15 minutes relaxing to music or a form of meditation after a good nights rest before trading. Conduct a Pre-Market Analysis myself, perform a top-down review of the major markets and develop a plan of the day. The trading day is from 9:30 a.m. (EST) to 4:15 p.m. divided into a morning session, lunch and afternoon session. I do not trade for the first hour on Mondays. I do not enter any new trades the last half an hour of the market hours (1545 1615 EST). After I have met my goal or the market is closed I will log my journal and then spend quality time with my family. At some point before the end of the day I will revisit the S&P trading day and back test my plan and system. Pre-Market Analysis Understanding that 70% of the volatility occurs during the first 2 ½ hours of trading, this step is very important. The goal here is to recognize probable entry or exit points. Check for and note important reports, events, and or news releases. Include in the plan of the day candidates and times for probable heightened price volatility. Look at Daily chart with ATR, 60 min and 13 min charts. Was there expansion or contraction? Annotate the previous days high and close with a black line.
Determine Market Bias. Where is the price relative to the Daily Pivot (Above the Daily Pivot is bullish bias, below the daily pivot is bearish bias) Note overnight support / resistance levels, double tops/bottoms and trends. Locate and note significant Swing Points. Where are the dynamics / stops? Calculate the previous days Average True Range (ATR). Review the cash, $OEX Globex and the DAX markets. Note the %ATR reached up until this point. Review the charts of the top 10 stocks in the S&P. Top down analysis is underlying (Weekly) (Daily) trend up, down or sideways? Is current trend with the underlying trend, or against the underlying trend? Create a Plan of the Day (POD) and Trade what I see with the POD outlining probable entries and exits. Set ups and the Rules of Engagement (ROE): I plan to train myself with Neuro-Associative Conditioning (NAC) to be proficient in 3-5 set ups. As I train through repetition and develop an absolute belief in the patterns and occurrences in the two markets then I will commit ROE s for each scenario and include them herein. At all times I will be aware of what direction the trading markets are in and when I see one of my recognized set ups, I will ask myself these three questions in order; RSI OB / OS then Where is Price relative to? Pivots Previous Structure The days ATR using Globex numbers Divergence Trade: * Primarily traded in the ES using the 3 Minute Chart. * A Unit is considered 4 contracts for a trade * RSI is overbought (O/B) * End of Move (bullish in this case) is likely * Pullback begins with bearish candles. * Identify a plan by getting S.E.T.; Stop will be 0.50 above recent High, Entry will be at close of the recent Lower Low (LL) Target 1 will be 0.5 below, T2 will be 1.0 point and T3 will be 1.5 points but allow for a winner to run by managing and adjusting stops. Place a trade resting in the market anticipating at least one or two retests of the recent high. * When a double top is formed, it must be equal or a higher high, then
* Bearish Divergence occurs in RSI; * Possibly a Bearish engulfing candle is formed with LL, and LH. * Be patient and as the M is formed the resting Sell Stop Order is ready to get me in the market as the trend goes into the planned entry point. * Targets are plan A and the Stop is well above the recent high that be out of the Market Dynamics for a retest of the recent high or it is Plan B to exit in case the trade goes against my plan. * Trade should not take more that 4 bars or 9-12 minutes to complete. Once the trade is done then immediately I CHECK FOR STOPS AND ORDERS RESTING IN THE MARKET AND GO FLAT.
Futures Trading Plan General Information This plan outlines my trading strategy for trading the Russell 2K e-mini contracts. It is also applicable for other future contracts including the following: (a) e-dow @$5.00/point (b) e-mini NASDAQ @$20.00/point (c) e-mini S&P @$50.00/point (d) e-mini Russell @$100.00/point Supporting Platforms and Systems The following systems and services will be utilized in my day-trading business: (a) esignal -- for real-time data feed and charts (b) Real-time trading room service -- (The Trading Authority) (c) IB Broker -- (d) Clearning House (Fortis) using PATS (e) Front end to PATS -- (TradeMaven software) Russell e-mini activities and setups for trading 1. Pre-market activities (a) Print out Daily Update sheets and review previous days high s and low s, & ATR range. (b) Review esignals previous day s (1, 3, 89T, daily) chart formations for previous support/resistance levels and signals/trends.
Page Two (c) Reset indicators on ES/AB charts and verify that esignal pivots are correct. (d) Establish TradeMaven connection and insert daily Pivots on trading chart. Ensure that all trading parameters are Established for Entry/Exit s, and account/contracts are ready for trading, prior to opening of the cash markets. 2. Contract Sizing (e) Log on to HotComm for real-time daily trading room Information sharing. Based upon an opening account balance ($7,500-10,000) two/three contracts will be traded in the AB daily market. With each additional $1,000 of capital added, one additional contract will be available, for additional position trading. 3. Entry/Exit strategy preset in TradeMaven The target entry point will be $0.20 ABOVE the Scalper level for long position and will be ($0.20) LESS for short positions. following Both long and short positions will be scaled out at the target profit points: Two contract lot -- 50% @.80, remainder at 1.30, trail stop Three contract lot 33% @.80, 33% @ 1.30 and remainder @2.5/points, with trail stops DO NOT MOVE STOPS AGAINST POSITION
Page Three 4. Time of Day and It has been found that the market can reach the daily high s low s range within the first hour of trading. Morning trades can produce better results, than the afternoon. Break from trading between 11:30-11:45, until 13:45 ET. Don t enter into a trade(s) after 15:40 ET. Some days the market moves very slowly and you must be patient in trading futures Do not force signals to be something they are not truly indicating. Page Four News Events/FMOC Actions/Option Expirations Daily new events have major impact on future index market s. Be aware of these daily events. This information is readily available and The Trading Authority will notify users, real-time, of upcoming events and times. Avoid being in the markets, prior to major announcements. Stand aside the market at least 30-60 minutes after a major news event, due to major market changes, that may occur. Be aware that on Option Expiration Fridays, the market can act very volatile in trading. Again, you may want to stand aside on these days throughout the year.
Daily Record Keeping Every trade made during the day should be entered on a Daily Trade Ticket. This will allow ease in reviewing previous trades, noting errors that may have been made in entry or exit setups and an audit trail of winners and losers. The daily results will be tabulated each night, after market closure, and entered on the Weekly Summary Sheet. See attached forms below.
Page Five Daily Trade Ticket Daily Trade Ticket Date / / 2005 Nbr Contracts Market AB ES YM SOS RSI Expansion Bull Bear Cong Pivots Gap--Open/Close S/Buy S/Sell S/Add-On Entry Time Entry Level Scale Out #1 #2 #3 --- Scale Out #1 Scale Out #2 Scale Out #3 Total $10 X X ( ) X ( ) X ( ) Current Position $ Rules Violated -- notes and why: 1. 2. Rev. 12/01/05
Page Six Weekly Summary Weekly Summary of Trading Activities Week of / / 20 Ticker # Contracts Win Loss Monday / Profit/(Loss) $ Tuesday / Profit/(Loss) $ Wedn. / Profit/(Loss) $ Thurs. / Profit/(Loss) $ Friday / Profit/(Loss) $ Total Earnings $ Total # Contracts $ 4 x Net Earnings $ Winning/Loss Ration
Page Seven Key Account Information Introducting Broker -- xxxxxxxxxxx Clearing Agency -- xxxx Clearing USA Support Center --- xxx/612-1600 TradeMaven --- 213/388-8248 Support Center esignal --- 800/545-0716 Randy Fox Remember to be a brick layer, repeat the same trading technique over and over again. Do not change your trading technique.