REAL WORLD
How To Make One, How to Follow One
The Trading Plan
by John "Jay" Norris
We all know that creating a trading plan is the first step in trading. Find out how one futures trader creates a plan and follows it.Combining analytics and execution is not new for individuals or professional entities, and most companies separate the two. Many individuals lean toward one or the other, but traders must do both. Traders must be patient and disciplined and accept that they will not have a choice regarding when a trade scenario will unfold. Traders just need to be in the habit of being at their stations every trading day rested and relaxed and ready to make their moves.
This plan concentrates on following all markets with the understanding that they will always follow their path of least resistance. If you are a novice, you need to do your homework and remember that futures trading carries risk of loss.
HERE'S THE PLAN
Prior to any analysis I need to be able to see the market on three time frames simultaneously, a tactic I was introduced to in Alexander Elder's book Come Into My Trading Room. Once I have the three charts in front of me, I determine the long-, intermediate-, and short-term trends for the daily, 240-minute, and 60-minute charts. This is a total of nine directional determinates that I break down into a directional ratio. I record these on a simple grid with up arrows, down arrows, or a hyphen indicating neutral or sideways.
With this setup, the short-term trend is considered 15 candle bars or less, the intermediate-term trend is 16 to 49 candles, and the long-term trend is more than 50 candles. I make these determinations from the market's highs and lows, trendlines and from moving averages. An example of this would be (5 up/2 down/2 neutral), which would lead me to lean toward buy triggers, particularly if the up arrows were coming from the daily and 240-minute charts. I can choose to trade or take triggers off shorter-term time frames, but I always use the daily, 240-minute, and 60-minute charts to give me the directional ratio and aid in determining between trend and countertrend trade triggers/signals.
For long-term trading you can use the daily charts to key off, the weekly charts to check the long-term trend, and the 240- or 60-minute charts for trade triggers. For intermediate-term trading you can use a 240- or 60-minute chart as the primary time frame to key off, with 15- or even five-minute charts for the triggers. The primary decision you will have to make is what time frame you should trade.
...Continued in the December issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the December 2007 issue of Technical Analysis of
STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2007, Technical Analysis, Inc.
Return to December 2007 Contents