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Planning your Trades in Stock Trading



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

For more on stock trading, check out Digital Nomad Here. 


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