Could You Explain Your E-Mini Trading Plan to Me? (Part 2)

In part 1 of this article I described the reluctance of beginning e-mini traders to formulate and write a comprehensive e-mini trading plan. Like many things in trading, I suppose that activities besides actual e-mini trading are perceived as spurious and unnecessary. In part 2 of this article I hope to convince you that writing a comprehensive trading plan (and following it) is one of the essential activities necessary for growth in your career.Styles of trading are unique from individual to individual. Like many things in life, no two individuals are going to approach it in exactly the same manner. We all tend to see and interpret charts in different ways, and how you abstract information from a chart will influence your evaluation of potentially profitable trades.It is important to arrive at similar conclusions about the potential success of a trade. As a mentor, I have a specific guidelines and criteria that define a position that is likely to succeed. How the beginning e-mini trader’s perception of chart variables leads to my specific guidelines and criteria is how I define a traders “style.” If I have learned anything in a lifetime of trading it is this: no 2 individuals see and interpret chart variables in exactly the same way. I think it is important to note that differences in styles of perception do not preclude 2 traders from reaching the same conclusion. The tool that I use to quantify a beginning traders style with the goal of arriving at the proper evaluation of trades is a written trading plan.What sort of things should be a good trading plan include?· First and foremost, I believe it is important for an individual to define, in specific terms, why they are trading.· A beginning trader should have quantifiable goals; short-term, intermediate term, and long-term. These goals should have specific objectives that are realistic and attainable.· What markets do you plan to trade? Why?· What entry criterions are necessary to enter a trade? I prefer of these criterion to be specific and quantifiable.· How will you manage risk? Some specific methodology for determining profit targets and stop loss levels should be discussed. Also, position sizing needs to be quantified and the methodology for the number of contracts you will trade should be specific. How will you exit trades? When? How about risk/reward ratios in your trading plan?· Money management is one of the most important elements of e-mini trading. What is your money management plan and how did you determine the components of your money management plan?· What is your pre-market routine? How will you prepare for the day?· I require all traders to keep a journal. How will that trading journal be structured?· What tools will you utilize in your trading? This section should include items like: trading platform, chart presentation style, indicators and oscillators, third party software, computer hardware, office location, and office environment are just a few of the many control variables that fall under the “types of tools” that I utilized in trading.· What approach to trading is appealing? While it may be early in your trading career, what setups have you learned to trust? What setups make you uncomfortable and why?· At the end of your trading day, what activities will you engage in to record trades and prepare for tomorrow’s trading day? Are there specific activities that may allow the current days trading to be reviewed?· A good trader is a lifetime student of trading. How will you advance your knowledge of e-mini trading in a manner that allows you to grow and learn as you gain experience?· Define the discipline you will use in your trading. Trading can often be a series of steps, a checklist that is used to determine trading profitability, frequency, and the probability.· How will you maintain discipline in your trading? What are signs that your discipline is slipping? How will you “right the ship” if you run into trading discipline problems?· What is the Golden Rule in your trading? You may have several maxims that define your trading. What are these maxims and why do you have them?These are just a few questions to help you, as an e-mini trader, begin the process of developing a coherent trading plan. There are many other components of the trading plan that may need to be included. The plan is yours, and should be unique to your trading. Avoid boilerplate type answers and give real thought to how you plan to trade. You will find that this document will need to be changed and updated as you grow as a trader. This is normal; it’s good and shows progress in trading.In summary, I have mentioned the reluctance of beginning e-mini traders to write a semi-formal trading plan. I hope that this article has given you some insight into the real value of having a trading plan. I have included some basic ideas or starting points in the construction of your e-mini trading plan but warned that these guidelines are not inclusive and there may be other considerations that need to be included in your plan.