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So how do you develop your written trading methodology? Here are a series of questions that will get you on the correct path for getting long. Repeat questions 2 to 11 for getting short, and again for standing aside. |
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1. When you explain how the market works, what do you say? |
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A. What metaphor would you use to explain the market to someone? Often a metaphor begins with "Trading is like. . . , " "The market is like. . . , " '' When the market rises it is like. . . , " " When trading it is like. . . . " |
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2. How would you finish these sentences? |
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A. "When the price goes up it is because . . . " |
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B. "When the market stops going up it is because . . . " |
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C. "I think the price is going up because . . . " |
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D. "I think the price is about to go up because . . . " |
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E. "When prices are going up, I begin thinking that the prices will falter when. . . . " |
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3. What exactly must happen for you to go long? |
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4. What else should be happening for you to go long? |
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5. What should not be happening for you to go long? |
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6. What must not be happening for you to go long? |
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7. What are your exact money management rules? |
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8. Exactly how do you determine where your stop loss order is placed? |
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9. Exactly how do you determine that the market no longer possesses continuity of bullish thought? |
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A. What exactly must happen for you to believe this? |
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B. If the bulls are still in charge, what should be happening? |
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C. What should not be happening if the bulls are in charge? |
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D. What must the bulls not allow the bears to do if they are indeed still in charge? |
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10. Exactly how is your exit strategy determined? |
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11. Exactly how is your reentry strategy determined? |
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Your goal is to write down in the most clear and precise manner how you see the market, what must happen for you to get long or short, what has to happen to exit the trade, and what has to happen for you to stand aside. The more exactly you can describe your beliefs and rules, the more your ability as a trader will increase. |
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