Planning a trade before entering it

[bothadb 0]

Hi,

 

I'm currently running on the DASTrader Demo simulator (just as well) and I'm finding it incredibly difficult to plan a trade properly before entering it. It just seems to happen too quickly!

 

I find that I then impulsively enter the trade without KNOWING the target, the stop, the risk/reward ratio, etc....

 

I have loaded TradeBench with the strategies and checklists I developed from "How to Day Trade for a living" but I find I'm not completing it before I enter the trade.

 

Any advice or experience on how to plan would be appreciated...... i.e. how do you do it so that you can be structured and disciplined...

 

Thanks in advance

 

David

[Robert H 453]

David, it takes a lot of practice to plan a trade in real-time (especially in the first 30 minutes of the market open). At least a month and hundreds of attempts until you develop a process that works for you. Once you get good at planning and managing the trade, you will be able to do it faster and faster each time. Like muscle memory of sorts. Here is what works for me:

 

Prerequisites

1. Stock is in play

2. Support and resistance identified in pre-market

3. Pre-market volume and price action is tradable

4. Know the float category (low, mid, high) and how many sharesI plan to take

 

While watching the stock

1. Spread is manageable

2. ATR/price swings accounted for (i.e, see how much the stock ticks. Is it going up/down in 0.01 to 0.05 increments, or 0.50 to $1)

3. Price action is clean and not choppy; related to above

4. Volume is good and not dying

5. Who is in control: buyers or sellers?

6. What is the strategy/pattern that is setting up here?

7. Is the price getting extended?

 

Finding an entry

1. Is the entry favourable (new 1-min or 5-min high), or will it be a chase

2. Did the stock pullback yet? If not, to which level could it test and will I survive that?

3. What's the target? Is it realistic?

4. Finding a reasonable stop at a technical level

5. Calculating the risk-to-reward

6. Executing the order with conviction--no hesitation

 

Managing the Trade

1. Is the live price action still clean?

2. Are we making higher-highs and higher-lows, or vice versa?

3. Are there are levels or tops/bottoms that I missed before entering that have now become a factor (i.e, a moving average on the 1-minute chart)

4. Is the market providing new information that validates or invalidates my original criteria?

5. Is the Level 2 bullish, bearish or neutral?

6. Is it a good time to add more (if I scaled in initially), or should I take some profit off the table?

7. If scaling out, how much and at what levels?

8. Is the price action conducive to my original stop/target?

9. Is control between buyers and selling shifting?

10. Given the above, does it make sense to stay in the trade or exit at break-even, before stop, or before target?

 

I know that is a lot to process in a short amount of time, but those thoughts go through my head before and during a trade. For others, it may be much simpler or even more complex. Best of luck.

[Robbie Williams 12]

This is a great post Robert! Very informative. Should be stickied