Trading Plans Class 1

Class Structure
• Class 1 - Outcome/Purpose/Objectives
• Class 2 - Trade Setups/Trade Tactics/Entry Requirements/Trade Management
• Class 3 - Risk and Account Management
• Class 4 - Record Keeping/Scanning

Tonight’s Class
• The Importance of a trading Plan.
• Think like a profitable trader.
• Defining your Major Trading Outcome(s).
• Defining your Major Trading Purpose.
• Defining your Trading Objectives.

The only way to achieve the consistent, rising equity curve all traders
desire is to have a detailed trading plan and to execute it flawlessly

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Trading Plans Class 1

Trading a Random Market

• The market has three directions it can move at any time, giving a trader basic success
odds of 33%.
• There can be unanticipated variables that contribute to market movement.
• Even with the best analysis, often times the market will surprise us and
not do what appears to be probable.
• Each trade is unique and independent from every other trade, even if
using the same strategy.

Analysis & Certainty

• Most traders want to be right on each trade (even if they don’t admit it).
• They become obsessed with their analysis because they believe analysis equals certainty.
• The only certainty a trader can have is knowing each trade has an uncertain outcome.
• Use this fact to your advantage.


Your future consistent trading results are in direct proportion to the

amount of uncertainty you can comfortably handle.

Belief in Probability
• How does one profit consistently in an environment that is uncertain?
• You MUST change the way you think about trading.
• Give up the delusion that you know you are right or know what is going to happen.
• The truth is you don’t need to know what is going to happen next.
• Adopt a new belief system about trading.

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New Empowering Belief

• You must believe each trade
has an uncertain outcome
and anything can happen,
regardless of your analysis or
desire to be right (or how
often that pattern worked in the past).
• You must adopt a new belief that while each trade could have an unexpected outcome, a
series of trades utilizing the same strategy and risk now becomes predictable.
• When you adopt and own this new belief and you start to trade from a probability
mindset, you now trade like a casino owner rather than the random and unpredictable
way of a gambler.

4 Primary Trading Fears

• Fear of Being Wrong.
• Fear of Losing Money.
• Fear of Missing Out.
• Fear of Leaving Money on the Table.
• These 4 fears plague 90% of all traders and keep them in a place of frustration.
• They keep traders focused on areas of their trading they cannot control.
• These fears cause traders to continue to trade in a random manner and never achieve
consistent results.

Primary Fear #1: Fear of Being Wrong

• The biggest mistake a trader makes is to think that the market will make you right.
• If you believe you are right, then it will be hard to objectively accept that a trade is not
working and you risk becoming a passive loser.
• This causes you to make self-generated errors and irrational decisions not in your best
interest.

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Trading Plans Class 1

Primary Fear #2: Fear of Losing Money

• Most traders never fully accept the possibility of losing because they believe they are right
and will will have a winning trade.
• They make decisions that end up causing them to lose money, which is want they are
trying to avoid in first place.

Primary Fear #3: Fear of Missing Out

• Causes traders to overtrade.
• Causes traders to not specialize.
• Causes traders to chase entries.
• Causes traders to become consumed with their trading.

Primary Fear #4: Leaving Money on Table

• Causes traders to be inconsistent with their trade management.
• Causes trader indecision on target(s).
• Causes trader to manage current trade based on results of the last trade.
• Often fuels their desire to be right, thus causing avoidable self-generated errors.

Your future consistent trading results are in direct proportion to the

amount of uncertainty you can comfortably handle.

The Solution
• A detailed trading plan eliminates these 4 fears and allows you to achieve the results you
want .
• These 4 fears will cause massive damage to both your trading account and more
importantly your PSYCHOLOGY if you succumb to them.
• Additionally you MUST have the mental maturity to execute your plan Flawlessly.

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Trading Plans Class 1

Your Trading Wheel

• How do you categorize your trading business?

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Trading Plans Class 1

Trading Plan Components

• OUTCOME:
➡ The traits and psychology you must adopt to achieve a consistent rising equity curve.
➡ Do not make it dollar or money related.
➡ Make it POWERFUL.
• PURPOSE
➡ This is your compelling reason(s) to keep you focused on moving towards your
outcome, no mater what.
➡ Utilize both pleasurable rewards and painful consequences.
• OBJECTIVES
➡ First pick your timeframe(s).
➡ Chunk your trading down to a money goal that is realistic and measurable.
➡ Utilize a top down approach.
➡ Laser focused to keep you on track.
➡ Prevents you from becoming reckless.
➡ Keeps you focused on probabilities.
➡ Include Target Batting Average, Sharpe

Ratio (average win/average loss).
➡ Display it in a table format.

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Trading Plans Class 1

Trading Plan Examples:

• My OUTCOME from my plan
✓ To always, in all ways, trade without fear and without becoming reckless and to
execute my trading plan flawlessly.
✓ To always, in all ways, think like the 10% of traders who are consistent winners and
achieve consistent profits with ease.
✓ To always, in all ways, trade to acquire skill.
• My PURPOSE from my plan:
✓ When I display the mental maturity to always, in all ways, move toward my Outcome
no matter what, I experience consistent profits, financial freedom for my family, the
ability to send my kids to private school, and give some away.
✓ When I don’t display the mental maturity to always in all ways move towards my
Outcome no matter what, I experience massive regret, literally robbing from my
family, and damage my psychology, all in a worthless effort to be right rather than
execute my plan flawlessly.

Sharpe Ratio >/= 2.5

Win Loss Subtotal
Batting Avg >/= 50%

4 trade/day 2 2

Per Trade 2.5 -1

Gross 5 -2 3

Weekly Gross 15R

Weekly Net 12R

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Trading Plans Class 1

Trading Rules/Laws
• Trading Laws are your “word” that you declare to yourself.
• You PLEDGE to do, and not do certain actions.
• Many of your Rules come from parts of your plan.
• It is your trading identity.
• These should be quick bullet points to remind you of the future trader you must be

to succeed.
Trading Rules/Laws Examples
• I am a consistent winner. I wait for my trade to develop and act only at the right moment.
• I do not take a trade with a risk to reward less than 1:3.
• I do not take an intraday trade unless the setup is available on the 15m chart or higher,
unless an early morning gap play (per plan).
• I do not take bad trades simply because it has a small stop. Even though the concept
might make sense in the moment, I always get caught up in the emotions and over the
long run it costs me more than I initially thought.

Homework
• Write out your OUTCOME.
• Write out your PURPOSE.
• Write out your Objectives for each timeframe.
• Write our what your beliefs have been regarding the market.

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