Ok, so its just one picture but it will need some explanation. Also, this picture doesn’t and won’t showcase proper money management. I’ll leave that part to you for this post. What it will do however is demonstrate appropriate entry, exit, profit, and stop targets…aka…the trading plan.
Now, I realize there may be some that read this and are already laughing that this could even be possible with just one picture. Many would argue that a great trading plan is all encompassing, a complete guide to how they will trade the market. With contingencies spelled out for as many different scenarios as can be imagined.
The problem I have with that method is you must spend too many years unprofitable. This alone creates a multitude of different problems but primarily the financial burden placed on a trading account balance.
In my opinion, this doesn’t end well for most retail traders. They either give up before the plan is complete or they’ve adapted the trading plan more times than a Fast and Furious movie. Making any chance of use nearly impossible.
If you are the person that can overcome and stick to it through every bad year and develop a truly sound trading plan you will likely thank yourself for a lifetime. As a great trading plan answers all the tough questions and makes trading easier than riding a bike.
If you’re like me, you want things simple and generally way faster than years later. So, why not use something that works now while learning something that works better? That’s a win-win, in my opinion.
The Simplest trading plan ever used.
Ok so now that I’ve rambled for several paragraphs lets take a look at the picture I’ve been referencing. Honestly, its nothing special but it can be quite powerful.
If you notice, I have a red, yellow, light green, and dark green bar drawn on the screen. The yellow bar is my identified entry. The red is my stop loss. Light green is profit target #1, and dark green is profit target #2. Like I said, very simple.
Of course from here the trading plan can be complicated exponentially but it serves to keep me focused on what I decided when I placed the trade. Does it help me win more trades or make more money, no, but it doesn’t let me play mind games with myself during a trade either and that’s why I love it.
I hope it helps in some small way.
Also, you may wish to have a look at this post I wrote a few months back about my Proven Trading Formula. In it I discuss the trading plan with more detail. Additionally, here is a post I found interesting that focuses on a simple but more traditional style of trading plan.
May God bless and keep your trading profitable,