CHAPTER 36
The Planned Trading Approach
If making money is a slow process, losing it is quickly done.
—Ihara Saikaku
If the amount of money you risk in futures trading represents a minuscule fraction of your net worth, and your major motivation for speculation is entertainment, the shoot-from-the-hip approach might be fine. However, if your major objective in futures trading is to make money, an organized trading plan is essential. This assertion is not just a platitude. Search out successful futures speculators, and you will no doubt find that they all use a well-defined, disciplined trading approach.
The following seven steps provide general guidelines for constructing an organized trading plan.
■ Step 1: Define a Trading Philosophy
How do you plan to make your trading decisions? If your answer is something vague like, “When my friend gets a hot tip from his broker,” “When I get a trade idea from reading a blog,” or “On market feel while watching the trading screen,” you’re not ready to begin trading. A meaningful strategy would be based on either chart analysis, technical trading systems, fundamental analysis, or some combination of these approaches. The same method will not necessarily be used in all markets. For example, in some markets a trader might use a synthesis of fundamental and chart analyses to make trading decisions, while in other markets decisions may be based on chart analysis only.
The more specific the trading strategy, the better. For example, a trader ...
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