Critique My Trading Plan

xProphet

Active Trader
Jul 27, 2013
64
0
27
Occupying Wall Steet.
Do you think this trading plan is achievable, overly ambitious.. or see any problems with my plan in general? (Who better then a room full of traders to critique a trading plan?)


My Trading Plan:
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Trading:
  • Day Trading: (Up to 3 hours in any position) Nadex's Forex Binary Options on; GBP/USD, AUD/USD, USD/CHF, USD/CAD, USD/JPY and GPB/JPY

Side Note: The binary contracts I trade are daily, and I normally trade them 3 hours before expiration(Keep in mind you don't HAVE to hold until expiration.) The binary option's price gets more and more volatile as they approach expiration. I find the 3 hour mark to be a level of volatility im comfortable with. (When actually holding until expiration.)

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Goals:
  • Weekly Goal: Gain 20% on 'entire' account per week. (Compounded weekly)
    • Objective: Place 10 trades a week or 2 trades a day gaining 20% per traded amount (Traded amount would be 20% of total account balance). Each trade should net me 2% on my entire account.
  • Daily Goal: Go "long" or "short" but place at-lest 2 trade each night. (I might switch this to 2 long because I tend to do better in slightly longer positions.)
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Money Management:

  • Take profit: 20% on each trade. (If I placed $100 on a trade then I would take profit on $120) (If the price starts acting like it's going to switch directions, then I would exit a little early.)
  • Stop Loss: Visually Monitored. Place a Stop-Loss marker on my chart before entering a trade. (Technical Analysis will determine actual location of the stop-loss.) (Nadex doesn't have very good hard set stop loss, so it's all on me.)
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Strategy: Technical Analysis.
  • Long position: Usually a 3 hour ride to option expiration. (Also the most profitable, consequently, the most risky.)(I've Extensively tested this from various angles in demo with roughly 80% going in my favor.)
  • Short position: Project Weather; Up to an 1 hour with price action immediately going in my favor. (Very lightly tested in demo and still under development.)
  • Long or Short: Use technical analysis to determine the best position, long or short.

Side Note: "Short" in this plan can be defined as an exit before contract expiration and "Long" as a hold until contract expiration. A long position would realize the maximum amount of money that could be made from the trade OR maximum amount of loss. (1:1 Although not always.)

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Plan Specific Rules:
  1. May enter more then 2 trades but most stop after achieving 4-5% of total account value.
  2. If taking constant losses stop trading for the day, Analysis losses then comeback the next day.
  3. Cut losses entirely and remain focused on daily goal. Don't try to make them up in the same day.
  4. Extensively record each trade and follow general trading rules.
  5. Remain neutral on position type ("Long" or "Short") until daily analysis points to the best choice.
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Problem Anticipation:
  • I may need to tweak the numbers to factor in, and compensate a loss margin.
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Misc:
  • "Project Weather" is a case study based on a theory of mine; Under similar conditions the markets will react in similar ways, but like the weather can only be expressed as a "chance of".


I think I've covered all my bases.. I genuinely appreciate any comments. I'm intentionally placing my plan under scrutiny to improve it and therefor the chances of it's success. I may not agree with every view point I receive, but I will, at-lest, consider them.

Of course ill test it in demo, after I complete project weather and develop "trades" from it. (Covered in Rule #4, "General trading rules")
 
Last edited:

Enivid

Administrator
Staff member
Nov 30, 2008
12,461
506
144
Odessa
www.earnforex.com
I would name the following problems:
  1. Why "up to 3 hours" in a position? How can we judge that as good or bad?
  2. 20%/week goal is a road to overtrading and/or overrisking.
  3. You expect all 10 of your daily trades to be profitable?
  4. Why any long/short bias at all? This is Forex - short and long work the same.
  5. I understand it so that "20% TP on a trade" is different from your goal of 20%/week on balance. Without knowing your risk on a trade on overall balance, it is hard to judge the figures.
  6. Visually monitored stop-losses is hardly an exit plan. What are exact conditions you will use to exit a losing trade? If you do not have them, it is a way to get seated on a pile of losing trades.
 

xProphet

Active Trader
Jul 27, 2013
64
0
27
Occupying Wall Steet.
I would name the following problems:
  1. Why "up to 3 hours" in a position? How can we judge that as good or bad?
  2. 20%/week goal is a road to overtrading and/or overrisking.
  3. You expect all 10 of your daily trades to be profitable?
  4. Why any long/short bias at all? This is Forex - short and long work the same.
  5. I understand it so that "20% TP on a trade" is different from your goal of 20%/week on balance. Without knowing your risk on a trade on overall balance, it is hard to judge the figures.
  6. Visually monitored stop-losses is hardly an exit plan. What are exact conditions you will use to exit a losing trade? If you do not have them, it is a way to get seated on a pile of losing trades.
1. The binary contracts I trade are daily, and I normally trade them 3 hours before expiration.(Keep in mind you don't HAVE to hold until expiration.) The binary option's price gets more and more volatile as they approach expiration. I find the 3 hour mark to be a level of volatility im comfortable with. (When actually holding until expiration.)

2. I expected this response. I feel that is a percentage I could achieve and have done so on demo when testing my strategies. (A correct hold until expiration makes this number very much achievable, with the Binary options I trade.) However, if in demo this percentage proves to be too burden some, I will naturally adjust it to something more achievable.

3. It's 2 trades a day over the course of the week. Each trade should net me only 2% of total account value. (The most risked on 1 trade would 20% of total account value/balance.) If i could win 10/10 every time, I wouldn't even bother with a trading plan. lol.

4. "Short" in this plan can be defined as an exit before contract expiration. and "Long" as a hold until contract expiration. As far as a biased on my part; I tend to be a bit more accurate with the bigger picture, then "what is the next 6 candles going to do.(I'm hoping project weather will aid in "bridging the gap")" However I enjoy the "short" positions a lot more then the "long" ones.

5. Nadex's binaries have a fixed risk and fixed return, I can never lose more then what is traded. (1:1)

6. While I do agree, I would much rather have a hard set but it does offer a bit more control over the trade. It's hard to put in fine print exactly what qualifies as an exit, because it's 100% dependent on the chart. I may set it on a support, resistant line or a MA.. It completely depends on what is going on in the chart. However, I do mark my exit on the chart BEFORE entering the trade, when i see the price trace to it, manually exit. In a nutshell: when my technical analysis is telling I was wrong.

Thank you for taking the time to read and comment on my plan, made revisions from the first post and gained a few things to think about.
 
Last edited:

eyeball

Master Trader
Sep 25, 2011
164
10
49
Critique

The idea of exitng a bnary trade before its normal expry tiime grants the option writer/broker an addtional edge over the option buyer/client. If the option is proftable at exit time the opton buyer is acceptng a lower payout than he would realize if held to full expiry (presumng the trade was profitable at expiry)--If unproftable he forfeits the chance for the trade to come back to profitablty.Under these conditons why trade binarys at all--you're better off makng outright spot trades
 

xProphet

Active Trader
Jul 27, 2013
64
0
27
Occupying Wall Steet.
The idea of exitng a bnary trade before its normal expry tiime grants the option writer/broker an addtional edge over the option buyer/client. If the option is proftable at exit time the opton buyer is acceptng a lower payout than he would realize if held to full expiry (presumng the trade was profitable at expiry)--If unproftable he forfeits the chance for the trade to come back to profitablty.Under these conditons why trade binarys at all--you're better off makng outright spot trades
I guess they gain an edge by not having to pay-out the entire "contracted amount" but profit gained, is profit gained.

So why not just go "long"? I've thought about this and the best answer I've come up with is; I don't always see a trade I think will be in my favor by expiration, every day. Some days I might only see trades that will swing in my favor for a short time then proceed to move against me. (possibly before expiration.) On the flip side some days I might not see any good "short" set ups but see some nice long positions. So in consultation, I think it would be foolish to strictly look for 1 long and 1 short. I'll edit my plan to reflect this new logic.

Thank you for your comment. Keep um rollin'!
 

Enivid

Administrator
Staff member
Nov 30, 2008
12,461
506
144
Odessa
www.earnforex.com
The idea of exitng a bnary trade before its normal expry tiime grants the option writer/broker an addtional edge over the option buyer/client. If the option is proftable at exit time the opton buyer is acceptng a lower payout than he would realize if held to full expiry (presumng the trade was profitable at expiry)--If unproftable he forfeits the chance for the trade to come back to profitablty.Under these conditons why trade binarys at all--you're better off makng outright spot trades
The reason to use binary options is that your own price expectations (based on your TA) may be different from those of option seller.
 

Enivid

Administrator
Staff member
Nov 30, 2008
12,461
506
144
Odessa
www.earnforex.com
1. The binary contracts I trade are daily, and I normally trade them 3 hours before expiration.(Keep in mind you don't HAVE to hold until expiration.) The binary option's price gets more and more volatile as they approach expiration. I find the 3 hour mark to be a level of volatility im comfortable with. (When actually holding until expiration.)

2. I expected this response. I feel that is a percentage I could achieve and have done so on demo when testing my strategies. (A correct hold until expiration makes this number very much achievable, with the Binary options I trade.) However, if in demo this percentage proves to be too burden some, I will naturally adjust it to something more achievable.

3. It's 2 trades a day over the course of the week. Each trade should net me only 2% of total account value. (The most risked on 1 trade would 20% of total account value/balance.) If i could win 10/10 every time, I wouldn't even bother with a trading plan. lol.

4. "Short" in this plan can be defined as an exit before contract expiration. and "Long" as a hold until contract expiration. As far as a biased on my part; I tend to be a bit more accurate with the bigger picture, then "what is the next 6 candles going to do.(I'm hoping project weather will aid in "bridging the gap")" However I enjoy the "short" positions a lot more then the "long" ones.

5. Nadex's binaries have a fixed risk and fixed return, I can never lose more then what is traded. (1:1)

6. While I do agree, I would much rather have a hard set but it does offer a bit more control over the trade. It's hard to put in fine print exactly what qualifies as an exit, because it's 100% dependent on the chart. I may set it on a support, resistant line or a MA.. It completely depends on what is going on in the chart. However, I do mark my exit on the chart BEFORE entering the trade, when i see the price trace to it, manually exit. In a nutshell: when my technical analysis is telling I was wrong.

Thank you for taking the time to read and comment on my plan, made revisions from the first post and gained a few things to think about.
1-2. OK, I get your reasoning.

3. 20% total account risk per trade is quite high. Losing two such trades in a row will be a hard blow, which is hard to recover from.

4. So, you mean "short-term" and "long-term", not "short sale" and "buying long"?

5. So, it is 100% loss per trade and 20% loss on balance per trade, right?

6. You are completely correct on that one. I have just got an impression from you previous post that you do not have any definite idea about when to exit your trades. There is a problem with such stop-loss though. You cannot measure your risks accurately, as it is hard to predict option price (what you exit at) for a particular underlying price (the trigger level for your exit).