Add This Variable To Your Trade Plan

Posted in: Advanced Trading Strategies, Trading Article, trading videos

more trading profitsLet’s be honest….we would all be better day traders if we only knew when to stop trading each session.

Before I discovered NetPicks,  I wound up giving back a lot of my trade profits.

It actually felt worse giving back hard won profits than it did just losing outright.

The real problem was that I had no intelligent or effective way to actually know when to stop trading.

If I quit too soon, I would miss a bunch of good winners. 

If I traded too much, I gave away my profits.

Like most of the coaches at Netpicks, I started as a customer.  One of the first things I was told was how important it was to utilize the ‘The Power of Quitting,’

To be blunt, it made absolutely no sense to me!

If the trading strategy was so good, then why would I want to quit trading?

It is such a counter intuitive concept and later, as I learned more and actually began to turn my trading around and had bigger profits, much of the new found success was largely a result of actually empowering myself to stop trading.

Quitting actually made me more money over time!

Yet, to this day it remains one of the least understood necessities to ongoing success but for those that understand it, it is a big part of their trading plan.

 

What is Power Of Quitting?

The Power of Quitting (POQ) is a dynamic goal setting strategy that allows you to take what the market wants to give you, while allowing you to quit with positive results on ‘most’ sessions.

In its most basic form, you need to get a winning trade AND have a positive result.

What is really exciting is that at times this can be accomplished with the very first trade sometimes.  Other times it requires more trading.

There are also different formulas that you could use:

  • POQ 2 means that you need to have TWO winners and a positive result.
  • POQ 3 means three winners and positive on the day.
  • The PTU Trend Jumper actually needs a full target winner for one of its winning trades to qualify for POQ.

One issue that gives many traders problems is knowing when to stop on a hard session.

There will be sessions with ALL strategies that just will not get positive. 

  • How long should a trader continue trying to get positive?
  • What’s a good circuit breaker?

This is one of the most difficult questions to answer because so much of it depends on the trader.

  1. How long can he or she trade?
  2. How much capital do they have?
  3. How much stamina and attention span do they have?
  4. How much skill?  Etc..

The only way to really know that answer is to actually conduct your own back tests so that you can come to the best answers based on actual research and understanding.

Each strategy is different.

Each market is different.

Some traders love finishing a session, one and done; that is, winning on the first trade to satisfy the basic POQ 1.

My own backtesting has shown me that the actual average profit per trade (the avg net of all trades in the back test) is actually higher with fewer trades.

POQ 2 might yield more net profits but it is actually less profitable and a lot harder, day in and day out.

Why work harder?  I prefer smarter.

If you can increase my average profit per trade, all you have to do is increase my position size as your account grows.  You do not need to trade more to make more money.

 

How You Can Trade More Often

Some traders want to trade more.  Maybe they like the action or they are trading for income but they also see the benefit of a POQ concept.

Diversification is certainly a smart thing to work into your trading too.

How does one satisfy all three while still remaining consistently profitable?

Here are two ideas that have a lot of merit.

Diversification

You could begin trading one market and as the session progresses, stagger in other markets.  Crude Oil or a Forex pair could start at a certain time in the pre-market.  When the US market opens, you could trade an e-Mini or a grain futures, for example.

You could also include some swing trading into the mix to diversify that type of trader you are.

Mini-Sessions

To find success with mini-sessions, you must know the best times to trade each market you are interested in. In the PTU for example, we learn how to use tools that help us isolate the most productive times of day to trade a specific market.

Some markets have various pockets of time that are more productive than others.

Taking that idea to the next level, you can treat each ‘pocket of time’ as a unique session, each with its own start time, stop time and POQ goals, typically, POQ 1, with a full winner being necessary to qualify.

That means you have to have a full winner and be positive before you could quit the mini session.

You can also combine it with a maximum number of trades, a maximum number of losses and a hard stopping time, which would end the mini session.

Then just wait for the 2nd mini session to begin.  The second mini session has its own unique trade plan and POQ, just as I described with the first.

Here are a couple of examples.

Using the new Trend Jumper Pro Plus Calculator and Automation, I was able to determine a two hour and 40 minute window to trade Crude Oil Futures early in the morning.  The trade plan allows me to take a maximum of six trades or two losses, with a POQ 1, whichever happens first.

The second session begins later in the am and uses a completely different chart and trade plan.  It goes for two hours and its own POQ.

Both plans operate at their own cadence and have their own personalities. 

As separate plans, they are each profitable.  Combining the two, adds more chances to grow the trading account while sticking to the ‘less is more’ concept.  You get to have my cake and eat it too, in other words.

For the Dow e-Mini, I actually have three different windows of time to trade three separate trade plans.  Each one is profitable in its own right but combining the three, adds a lot of fire power and juice to the bottom line.

It’s also very flexible.

If you am not available for one, you might be available for one of the others.  It’s a great way to go.

 

What Not To Do

One of the most vital traits as a trader you must have is not to be suckered into over trading.

Combining a smart and dynamic goal setting strategy to your overall trade plan is essential to success.

Anyone can make a winning trade.  The hard part is hanging on to your hard earned gains on a steady basis and consistently growing your account.

That’s why we trade. 

Remember, it’s not the quantity of trades that we take.  It’s the quality!  It’s being able to keep our profits.

Controlling one’s risk exposure to the market is critical to success and the Power of Quitting is the perfect solution.

But it might not be for you.  Understanding that, consider the concept of trading a mini-session and focus on the most productive times to trade each market.

Consider the idea of the mini session and learn to focus in on the most productive times of day to trade while still controlling your exposure and keeping your profits.

Whatever method you decide on, the key is to ensure that you are not turning a winning day into a losing day because you were undisciplined in your trading.

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