Stock Trading Planning

Money Growers PH shares how to plan your trades in stock trading

• set entry point
• set sell point
• set stop loss or stop profit
• risk computation (risk reward ratio of 2:1)
• portfolio allocation
• potential reward

He first draws a line on the chart for the lines of support and lines of resistance. Buy on support, sell on resistance

Chris Cruz shares his reasons for buying

• Uptrend
• Old resistance becomes support
• Fibonacci 23.5%
• MA 20 support

Abraham Avila Jr of Abs Trading shares

What's a trading plan?

Trading plan helps you to organize your thoughts and takes the emotion of the stock trading

Structure of set of guidelines, define your trading activity, and what and when and how to trade

Why create a trading plan?

manages your risk better

streamline decision making

helps you enter and exit based on strategy and not emotion

maintain disciple

How to develop a trading plan?

Answer the 7 questions

1. what markets are you trading?

- US market? Futures? Crypto currency? Commodities? Stocks or Equities?

- mastery or focus; pick one market then once mastered that's when you pick another. There is also a saying not to limit to once income vehicle

2. what time frame?

- as newbie, focus on one thing. Pick on the set-up most suitable to you. Position trading? Momentum trading?

- as a newbie, master daily candle or daily time frame for now

3. how much are you risking one each trade?

- risk first before profit; how much are you willing to loss to lose?

- started with 25,000; newbies advised to risk at 5 digit amount to as much as 100,000

- biggest lost placed at 2,000

4. What are the conditions of your trading set-up?

- what are the criteria to enter a stock

5. How will you enter your trade?

- breakout? retracement? pullback?

6. Where is your stop loss?

- 5%? Break of resistance?

7. Where is your profit target?

What markets are you trading?

PSE Market capitalization

Blue chip (top 10 companies): Investors; mabagal ang returns

2nd liners (good fundamentals): Investors/ Traders;

3rd liners (Basura stocks): Traders

What is your time frame

Position trader:

- look at big picture--weekly

- Entry/ Exit--daily

Swing trader:

- look at big picture--daily

- Entry/Exit--intraday (minute chart/5 or 15 

Day trader

- Entry/Exit: intraday

How much as you risking on each trade?

Risk should no more than -1% of total portfolio per trade e.g. 100K portfolio lose only 1K

Position sizing and allocation. Avoid buying a lot of varied stocks with low volume.

Buy 8,000 per share to save on transaction fees

Risk Reward ratio 1:2 or better

What are the conditions of your trading setup? Parameters

downtrend? range? uptrend?

Range trend better for experienced trader; buy on support sell on resistance

Uptrend: you just enjoy the ride; recommended (trend or swing) for newbies

Downtrend: avoid for newbies; may be done by experienced traders with success

If price > 20 MA >50 MA > 100 MA then the trend is bullish; AOTS by ZeeFreaks

How will you enter your trade? Triggers

buy on support, sell on resistance

buy on breakout: recommended

buy on retracement

if trend is bullish, then identify the resistance where price could breakout to

if price break the resistance at near end of day, enter an allocation 50% max of total accounts

Where is your stop loss?

If price return back below the previous resistance or reached -3% to -5% loss then cut loss

Where is your profit target?

If price snaps the 20 MA, then take profit

Sample Trading Plan

Trade setup: breakout play

Trade objective: trend following

Primary Criteria

- prior consolidation

- breakout of resistance of the consolidation

- volume spike

Secondary criteria

- longest range in the past 10 days or 2 weeks

- new 2 month price high

- price closed above the upper 50% of the day's range or better

Indicators

- AOTS

- RSI 71

- MACD crossover

Abs Trading checklist for Breakout Play (old study)

AOTS
Breakout of resistance

Supply and demand

Prior consolidation

Longest range in the past 10 days

Price closed above pivot point of the day's range 50%+

RSI above 70

Trend Following and Darvas

On a personal note, after learning about technical analysis, I have purge my stock to let go of the old mindset and apply the new effective system.

Time for execution. Practice and practice until mastery is attained. It will be "Plan. Execute. Reflect"

I decided to shift to reading the blog of another successful trader who has the setup I prefer: part-time and trend following. I got into that conclusion after I read about how much portfolio you should have to earn comfortable. Small trades for now when I haven't reached that desired portfolio.

It starts with a post on the career of Nicholas Darvas. He was a dance foremost then trader second. He was dancing all over the world when he earned $2 million. But his quotable quote includes: " I am the captain of my ship." And goes on to share who he relentlessly study until he got is own style.

Different trading styles and styles, Trading 212 shares on chart time frames

• for trend following: daily >> weekly >>3 to 6 months; low maintenance
• for breakout trader: 
• for swing trader: 3 every 3-4 hours
• for day trader: 10-15 mins char; requires more attention; high frequency trade

ZF shares that trend following

• easy to learn and master
• does not require a lot of indicators
• uses mainly 20/50/100 MA

Elements of Trend Following as derived from Ed Seykota

• initiation
• holding 
• liquidation

Pitfalls of Trend Following as shared by Kay Sebastian; she begins that it is not for everyone

• initiation
• good periods of the market has little movement and may bore trader
• never getting the earliest entry
• goal of trend following is to enter the trend not finding the lowest of lows
• holding
• getting stuck in consolidation; other traders like momentum are gaining more
• hanging on to large profits; when your profits, greed creeps in
• liquidation
• cannot sell at the highest level

Key to trend following

• asymmetric nature of trading; upside is way higher than downside
• trend followers manage their downside through position sizing and tight stop loss but trend follows do not set target prices

Fibonacci and Breakouts

Yggrasil shares how he spent 10-15 hours a day trying to learn stock trading. I have the same story. I am learning from the sidelines. Learning from the free stuff and then I got hold of the Blueprint. It has enlightened me greatly of the ways of stock trading.

ZF shares on the interpretation of Fibonacci retracements

• as long as FIBO is 38.% and above, bull territory (more money)
• between 38-50 is bullish bias
• between 61-50 is bearish territory: dumping or accumulating time
• 61.8-76.4% is last chance area; possible bounce play
• below 76.4% is death zone

Rayner Teo shares how to trade on breakout

• breakout with buildup: buildup he means a period of sideways trend
• higher lows into resistance or ascending triangle on trendlines (price going up)
• lower highs into support of descending triangles on trendlines (price going down)
• re-test where he illustrates when the previous support because the new resistance

Trading 212 shares on how to trade on breakout

• breakout means price moves and closes ABOVE resistance levels ad BELOW support levels
• trade range: support + resistance levels
• enter on actual breakout
• pre-set level before the breakout at previous high
• enter when candle closes above the trade range
• false breakout: when price breaks support and resistance and return back to trading range

Here is tutorial on trading retracements by Trading 212

Stop Signs and End of Trails

This post continues on how to set trail stops and when to sell. The aim of which is to avoid loss.

Rayner Teo, a Singaporean independent trader, shares on 5 stop loss techniques

• moving average: exit your position when price closes below 20 SMA
• martket structure: exit when swing low is hit
• percentage: exit with 10% change in  high is hit
• average true range: 5 ATR from the lows; slash chandelier stop
• Previous candle: trail based on the previous candle high or low

MoneyGrowers shares how to set stop loss; it is based on trade objective: momentum or bounce

• for momentum play, place stop loss at confluence of support (read below)
• bearish engulfing candle signals potential sell; the opposite bullish engulfing candle signals potential buy 
• if prices glide in 20 MA, momentum might build up

RKay shares places to place an stop loss

• recent swing high
• recent swing low

ZF shares

• During parabolic runs, hold until candle goes below the previous days's closing price
• Buy on Breakout and Set Trailing Stops
• 3rd day red candle with gap (abadoned baby sign)
• FastK at buy levels with RSI at 53 *on sample chart analysis
• It is also common to set trail stop at previous green candle or moving average or retracement

RKay shares about confluence Confluence Trading Price Action Techniques

• Confluence:  two or more levels  come together at a certain point on your chart 
• It can be a a trendline coming together at at 61.8% or 50% fibonacci level
• it can be a support level meeting a rising trendline
• it can be a Fibonacci level meeting a support level where price meet

RKay shares further that there are 4 areas or levels confluence trading can happen

1. support levels
2. resistance levels
3. fibonacci levels
4. trendlines