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Jose Rodrigo Escobar

Planning a Trade vs Trading Plan - Skills required to plan a trade

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Posted (edited)

Hey BBT team!

During this trading journey I've learned a lot of many things and still have a struggle with performance and consistency. One of the things I have noticed is that the a plan for my trades is often missing on the daily basis, and been having hard time finding the right information about it. One of the rules and recommendations for every trader is to plan a trade and stick to the plan, but how do you actually plan them?

A lot of the information about planning trades goes back to how to build a trading plan but I find the information vague about the actual planning. Most of the information focuses on the trading plan as a business plan for your trading (motivation, discipline, goals, risk, journaling, etc) but rarely on what to analyze on a chart, which information is more relevant, how to set if-then scenarios from the premarket and how to trade them. I believe that this information will depend on the strategy that you want to trade but I'm pretty sure there might be some criteria that might apply to every strategy. 

In order to understand the information provided by a chart, scanner or news, I believe that a set of skills must be acquired, which also haven't find a good list of suggestions. Most of the skills listed on blogs and webpages are a little "general" for example: discipline, resilience, mindfulness, but what about technical skills?

I've come to the following list of technical skills every trader should develop:

  • Candlestick shape and pattern understanding
    • Not only knowing about what candle shapes mean but also understand what they mean in different contexts and what can you tell about the pattern they are making
  • Indicators
    • In the mastermindPro series they talk about having 4 indicators, one of each type: Dynamic, Structural, Statistical and Geometric
  • Tape Reading
    • Being able to read level 2 and the T&S
  • Edge
    • Having chosen an strategy, tested it with statistical accuracy and build confidence around it
  • VPA
    • Understanding what the volume tied with price action is telling you about the stock movement
  • Support and resistance
    • Being able to identify levels and understand their meaning for the price action
  • Pivots
    • In my case I use Camarilla Pivots but is important to know what the price may do if reached certain number of pivot up or down and how that will affect your trade

Other skills I haven't mastered yet:

  • Volume profile? 
  • Reading the daily chart?
  • Overall market information and the sector of the stocks you are interested in trading?
  • Events like earnings or Fed meetings?

What do you traders think? Should be any other skill developed in order to obtain success in trading? Have you find a good guide on how to plan an individual trade?

 

 

Edited by Jose Rodrigo Escobar

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