Trading Without Gambling: Develop a Game Plan for Ultimate Trading Success

Acknowledgments xiii

Introduction 1

Chapter 1 Everyone Needs a Plan 7

The Hanging Curveball 7

A Typical Bad Trader 9

A Typical Good Trader Prepared with a Plan 9

The Trading Plan and the Game Plan 11

A Disclosure or Two before We Continue 13

Chapter 2 The Trading Plan 15

What is a Trading Plan? 15

A Simple Trading Plan 16

Why a Trading Plan? 17

A Business Plan for Traders 18

Making a Trading Plan 19

Breaking Down the Trading Plan 20

Closing Thoughts 23

Chapter 3 The Game Plan 25

Always Be Prepared 25

Why a Game Plan 26

The Basics of the Game Plan 27

Know Yourself 27

Drawing up Scenarios 27

Making Your Plan Work 29

Closing Thoughts 32

Chapter 4 Get to Know Yourself 33

Different Types of Traders 34

Figuring Out Who You Are 35

The Importance of Knowing Your Style 36

Two Sides to Every Story 38

Closing Thoughts 39

Chapter 5 Trading Strategies 41

Trading Strategies 41

Your Strategy Needs to Fit Your Style 42

Technical Strategies 42

Building Systems 45

Don’t Be Stubborn 50

Why Should You Have a Strategy? 51

What Goes into a Strategy? 51

The Entry 52

Exits 52

Times Frames and Holding Times 54

Stick to Your Trading Strategy 55

Closing Thoughts 55

Chapter 6 Know Your Markets 57

Markets Differ 57

Know What You are Trading 60

What’s the Real Risk? 62

Time Frames and Charting 63

Who Moves the Markets? 68

Know Any Correlations 69

Getting the Big Picture 75

Closing Thoughts 75

Chapter 7 After the Close 77

Let’s Review 78

The Open Trades 79

Thinking about Tomorrow 88

The Closed Trades 89

Getting Ready for Tomorrow 91

Review Your Plans and Strategy 92

Closing Thoughts 93

Chapter 8 Before the Market Opens 95

To Each His Own 95

Getting the News 96

Know Your Markets 97

Look at Overseas Markets 98

How are the Markets Opening? 98

Making Adjustments 99

Were There Any Big Moves Overnight? 100

Look for Possible Trading Situations 101

Draw Up Scenarios 103

Adjusting Size 103

Make Your Daily Game Plan 104

Closing Thoughts 105

Chapter 9 Drawing Up Scenarios 107

Know Your Markets—Revisited 107

Getting the Big Picture 108

Getting a Better Picture 109

End of the Day 113

Back to Monitoring Open Positions 114

Once the Trade is On 115

The Day Trader 122

Making Scenarios for the News 123

Generic Stuff to Look at with Open Positions 125

Closing Thoughts 130

Chapter 10 Taking the Gamble Out of Trading 131

Good Trades Can Be Losers 132

Two Parts to a Trade 135

Same Market, Two Views 136

Going Long 136

Going Short 139

Waiting for the Right Opportunities 143

Measure the Risk-to-Reward Ratio 143

Ways to Get the Odds in Your Favor 145

Closing Thoughts 148

Chapter 11 Getting In 149

Spotting the Opportunity 149

Planning the Trade 150

Drawing Scenarios for Getting into the Trade 152

Don’t Chase the Market 154

Timing the Trade 154

Look For Patterns within the Long-Term Trade 155

Knowing the Risk 159

Deciding How Much to Trade 159

Closing Thoughts 160

Chapter 12 Getting Out 161

Preestablish Your Exit Strategies 161

Cutting Losses and Letting Profits Ride 162

Using Stops in Your Game Plan 163

Planning Your Risk 164

The Setup 165

Trading the Gap 167

Another Trade 170

A Crazy Day 171

Planning Your Target 173

How Will You Exit? 174

The In-Between Area 175

Closing Thoughts 175

Chapter 13 Reviewing and Managing 177

After the Trade is on 177

Looking Ahead 182

Reviewing Your Trading 184

Keeping a Journal 188

Closing Thoughts 189

Chapter 14 How to Keep from Overtrading 191

Why Have a Plan 192

You Don’t Always Need to Be in the Market 192

Stop Being in Too Many Positions 196

Using a Game Plan to Help if You Trade Too Many Positions 198

Keeping to Risk Management Limits 200

Closing Thoughts 204

Chapter 15 Money Management 207

Don’t Take Risk Lightly 208

Another Gambling Analogy 209

The Money Management Basics 211

Incorporating Your Money Management Plan into Your Trading Plan 220

Incorporating Your Money Management Plan into Your Game Plan 221

Establishing Money Management Procedures for Open Positions 223

Closing Thoughts 223

Chapter 16 Trading Rules 225

Trading Rules 225

Using Your Rules to Make a Trading Plan 226

My Trading Rules 227

Appling the Money Management Rules 228

Applying the Entry Rules 229

Applying Your Exit Rules 231

Applying the Discipline Rules 232

The Top 25 Rules 233

Closing Thoughts 240

Chapter 17 Focus and Discipline 241

Staying Focused 242

Distractions 242

Have a Routine to Help You Write a Game Plan 244

Following Your Plan 245

How to Stay Focused if You Have Trouble Staying Focused 246

Mental Side of Discipline 248

Keeping Tabs 251

Unwinding after the Day 253

Closing Thoughts 254

Chapter 18 Learning How to Win 255

Clean Out Your Closet 256

Don’t Blame Others for Losses 256

Think of It as an Expense and Not a Loss 257

Self-Destructive Behavior 257

Learn from Mistakes 257

Trade, Trade, Trade 258

Curb Your Emotions 258

Losses are in the Past 258

Money Management is More Important than Trade Selection 259

Treat Yourself 259

Preserve Precious Capital 259

Have a Cutoff Point 260

Jumping in Too Soon or Getting in Too Late 260

Do Not Let Big Winners Turn to Losers 260

Make a List of Rules 261

Trade Your Style 261

Use a Proven Strategy 261

Tips are for Bartenders 261

Learn as Much as You Can about What You are Trading 262

Keep Learning 262

Read and Learn 262

Trade with a Plan 264

Fill in Your Own 264

Final Thoughts 264

About the Author 267

Index 269