Building your own trading plan

How to build your own trading plan and what trades can be taken.

Questions

Do I really need need to create and follow and trading plan?

Do I need to have a daily routine?

Trading plan. Trading with the trend

What are the trade setups that I can trade in a trending market?

Where can I see examples of valid and invalid trades?

Trading all-time lows, IPOs and ICOs.

Do I really need need to create and follow and trading plan?

Yes, you need to create your own trading plan and follow it.

You probably know that you should have a trading plan in place before entering a trade.
But what does that really mean? Here are a few ideas for creating your own trade plan,
along with some of the order types you can use to implement it.

A trading plan is designed to predetermine your exit strategy for any trade that you
initiate. Before you actually enter the trade. If you make your trade plan in advance, your
overall approach is less likely to be influenced by the market occurrences that can, and
probably will affect your thinking after the trade is placed. Not only that, but you are
also less likely to let your emotions gain control of your trade execution.

Managing your emotions

Are you emotionally and psychologically ready to battle in the markets? Emotions will
take control every time you analyze the market. You need to have a sound plan to
combat anger, fear, pain and greed. Because if you don't, your emotions will kill your
trading plan. You need to have control of your emotions in order to execute your
trading plan. Let your emotions take over, and you will blow up your trading account
over and over.

This is the most difficult aspect of trading. You can read dozens of books, be good at
spotting trading setups and pulling the trigger, but if you let your emotions control your
trades and your goals, you will not succeed at trading.

Do I need to have a daily routine?

Yes, you need to have a daily routine and follow it. Not only that, you also need weekly and
monthly routines.

If we want to lose 10 kg but refuse to eat well, exercise, and change the habits that created the
extra weight in the first place, affirmations by themselves probably won't work. The same applies
to our finance and trading, if we want to become financially successful but don't set goals, have
plans and act upon them in meaningful ways, we can visualize all we want, and we're probably
going to remain where we are. Maybe in some other parallel universe we have yet to experience,
we only need to hope and think about something, and it will happen automatically, but here in
this world we live in, the action is required. If this analogy was not good enough for you think
about why can't people give up smoking or why is it so difficult to break up a relationship with
your girl-boyfriend.

Quote
No matter how many books on self-help, self-esteem or law of attraction you read, reading
them will not help you achieve your goals. A plan of action is required to attract the
circumstances that will make it happen

To be successful, you have to do more than just think about success; you must act in
meaningful ways, attracting the circumstances that make it happen. If we want a healthy body, a
promotion in our full-time job, a million dollars, success in trading, or any other goal we have
envisioned for ourselves, we need to do more than thinking we can do it and then sit back
hoping for the best.

Quote
It's through daily repetition that the conscious mind imprints patterns into the subconscious.

his is why I am always emphasizing the importance of daily routine and practice. Sacrifice is
needed, it sounds unpleasant, but it is not. We sacrifice watching TV so we can work out at the
gym or going out for dinner with our friends. We must not be ignorant about what is required
to become successful in trading or life. We have to be willing to make whatever is necessary to
achieve our goals.

Daily routines

Without a daily trading routine, you won’t make it.

Top athletes perform well because they have rituals and routines for everything single thing they
do in life. I think we can all agree that habits are what determine our success or failure in any
endeavour or challenge in our lives. Trading is not an exception. How do we develop the type of
habits that will lead us to become profitable traders? The answer is straightforward: Routine.

Proper trading habits do not just magically appear out of thin air. These habits can sometimes
take years to form. Not everything is loss luckily for you because you have the power to come
up with a plan and put it into motion, a plan that will bring forth the proper trading habits. The
development of positive habits, the ones that lead to success in any field, is something you can
make a conscious effort to achieve simply by implementing consistent daily routines.

When you think about your daily trading routine, what do you think about? Do you even have
one? Are you aware that professionals, not only professional traders but lawyers, doctors, have
strict routines whether they realize it or not? They follow these plans and routines like clock-
work, everything from diet, exercise, sleep and meditation. One thing that any successful
professional has in common is that they have gone from daily routines to ingrain those habits
that virtually guarantee consistent and on-going success in their field.

I am not talking about just having a trading plan either. I’m talking about what you do from the
time you wake up to the time you sleep, this is all part of your daily trading routine. Professional
traders have developed a daily routine that maximizes their ability to trade successfully.

This routine can take you about 1-2 hours every day, some days it can make you less, about 30
to 60 minutes maximum. It will depend on how many instruments and which entry timeframe
you are trading, as well as how experienced you are.

Since I am on GMT +1 by living in Spain, I can trade the best two markets, the London Open and
NY Open. If I were to trade Forex, I would chose to trade the London market since it's the
biggest market and it is in my time zone. However, it doesn't really matter which market you
choose since we are focusing on swing and position trading. You can trade at nights after work
or from work when you have some spare time. SD levels have no waking time; they just exist.

Quote
The beauty of supply and demand swing trading and having a strict plan is that you don't have
to be in front of the computer all day long

Check your emotional temperature. What the heck is this?

• If you feel anxious, sad, low or precisely the opposite, don't trade, you will not be making
the right decisions. Take your day off.
• Being in control of your feelings and emotions is essential for trading, you need to have
a clear mind. If you feel emotional, auto-sabotage will probably occur.
• Ask yourself how you are feeling, take your emotional temperature and make an
objective decision.

Check what the US Dollar Index #DXY is doing, or what the major US Indexes are doing if
you are trading Stocks.

• Forex is all about trading currencies and speculating on other countries' economies.
• The US Dollar is one of the strongest ones if not the strongest. The dollar index is a
major index and key to Forex traders.
• Check the S&P500 and Nasdaq indexes if trading US Stocks. If the major US indexes are
bullish, only take long positions on stocks.
• If the dollar index has hit a fresh and original HTF supply, the euro and the major will
probably start bouncing off if they are also close to an opposing HTF demand area.
Similar to the major indexes.
PRE-PLAN all of your trades

• Decide what direction you can take on the setups you located and place your limit
orders.
• Decide which conditions would prevent you from taking the trade or make you cancel
them (TL break, HTF too close, etc.)
• ALWAYS pre-plan all of your trades, do not use market execution orders because your
emotions will drive those orders. You will see that you missed a setup, trade is already
playing out, you want to be in... but you know what? You missed that train, skip it!

Allocate some time to practice the rules daily

You've been a good boy/girl by finishing your daily job quite fast, and you have spare time.
What to do? Add more instrument and trade more? No way.

• Use the remaining time to practice on Forex Tester, stay away from the live charts (you
are not allowed). Allow for at least three sessions (1 hour each) a week of forward testing
with Forex Tester. Recommended 5 hours a week, organize your time as you like
• Speak to yourself, by talking out loud you will be more objective and listen to your
thoughts. You will black out the noise

Walk away and turn off your computer

This one task overrides all previous tasks. If you don't stay away from your computer and leave
your trades alone, you will be wasting your time and your money since you will be changing
them depending on your emotional status at the time

Rituals are important. Manage your energy and fatigue

• Managing your energy is a decisive factor for your trading routine or any other routine
that you have in your life.
• Rituals are important. It's preferred that do the same thing at the same time and the
same way. By doing so, a new habit will be created, and it will be second nature for your
mind, no further thinking will be needed to execute a routine or a habit

CREATE A HABIT AND ENJOY LIFE!

Once your daily trading routine is over, enjoy your spare time, your family and friends. Let the
market do whatever it has to do, you are not in control. No matter how much you look at the
charts, you are not going to cause the movement of a single pip
Trading plan. Trading with the trend

Now that we know what we need for a trading plan, it's time to write your own. There are a
series of variables we will need to consider. Flexibility is allowed, but how flexible, where and
why needs to be covered in the plan in a lot of detail. Otherwise, subjectivity and emotions will
take control over your trading and will produce unnecessary losses.

A trading plan is directly related to the type of trader you are and the timeframe sequence
you've chosen to trade. You first need to decide which timeframe sequence you want to trade,
one that suits your personality, job and needs. Do not fall in the trap of setting unrealistic goals
like 20 or 30% monthly return that will just not happen. It just can't be consistent.

The following trading plan is just one of many different plans you can create and follow. This
plan is entirely focused on trading with the trend, counter-trend scenarios can be added to it,
but this trading plan is exclusively a trend trading plan. Remember that counter-trend trades will
most of the time, be the trades that diminish your capital and take away the hard-earned money
in clear trend trades. Hopefully, you will learn that over the months and years in your trading
career.

The following trading plan takes for granted that you've done your homework:

• Back-tested Set and Forget's supply and demand strategy for a minimum of 6-9 months
on a backtesting software and been profitable in your tests
• Achieved 50% win/loss ratio or bigger on your paper trading
• Paper traded the strategy for 6-9 months and been profitable for at least six consecutive
months with an average of 5% monthly return. Alternatively, you can test the strategy on
a live account using a small amount of money. You will learn better if every loss hurts.
• You have not started to trade live without having to go through those stages with
success.
• Use the trading plan below as a wireframe to build yours on top of it.

Trading Plan Example. Trading with the Trend

Type of Plan. Trend trading using the Monthly sequence, that is, using monthly, weekly
and daily imbalances. You can adapt the entries to be used with other sequences like
the weekly or the daily. Revise every 3-6 months.

Daily Routine

This routine will change depending on the part of the world you live in and the type of markets
that you trade. As a Forex trader, you will have more flexibility to trade since Forex is a 24 hours
market. If you trade US stocks, you will have to wait for the US market to open and resume your
daily and weekly analyses routine according to your timezone and based on the US market
open.

• I usually wake up, have breakfast, lunch and dinner every day at the same time. Why
shouldn't you treat trading the same way?
• I wake up at 6:00-6:30 am.
• My analysis and trading should be done by 7:00 am. I am not allowed to look at the live
charts until the next trading day. I am not allowed to modify any of my existing orders
once I'm done for the day. My office is closed; I have no keys. I am not allowed in.
• I focus only on assets that are clearly trending.
• I am only allowed to trade for 1 hour a day.
• Update the trading community and reply to emails from 7:00 am to 8:30 am.
• Switch to mobile mode. Keep on replying to urgent posts from my mobile after 8:30 am.
• Since I am only trading stocks, I will be available when the US market opens IF, and only
if, I need to plan or manage a trade.
• Enjoy the rest of the day doing the things I like.
• Allocate some time for backtesting the rules.
• I'm allowed to do all -ing activities except trad-ing.
• I'm not allowed to install any application on my mobile to keep track of my trades.

When travelling or on holidays, I must be flexible and trade whenever I have access to a decent
DSL connection. I must accept that I will miss some trading opportunities when I am on holiday
or travelling. Consider not to trade at all for a more relaxed and peaceful mind.

Entry and Exit

• Once a trading opportunity has been identified, plan the trade in your
trading platform. Don't think twice.
• Order placement using levels for protection and set alerts.
• Place orders and let the trade breathe. Do not watch it closely, instead set alerts
to take action if certain price levels have been reached above or below the entry.
• Exit at a fixed target of 3:1, three times the width of the imbalance including the
padding.

Plan your exit strategy

There’s no one-size-fits-all trade plan, but at the very least, consider planning your exit
points based on a certain profit target or specific loss tolerance.

For example, suppose you bought stock #XYZ trading at $30 and risked $150 on it. You
may want to set exits based on a percentage gain or loss of the trade. Using
percentages instead of dollar amounts allows you to treat your trades equally. For
example, some traders will exit the trade at a 50% loss or a 200% gain. So that’s their
basic plan, at least on paper.

Exiting with a profit of 100% would mean selling #XYZ at $36 for a $150 profit since
that's what you initially risked. Exiting the trade with a 50% loss would mean selling the
stock if it drops to $75, which is half of the initial dollar risk of $150.

Money Management and Trade Management

• Risk per trade: 1% or less

• Risk a maximum of 1% of my account per trade and 5% total at any time. Or
risk 0.5% and take twice the trades with half the risk. You might want to trade
four correlated instruments, instead of taking 2 x 1% risk trades, you would take
four trades at 0.50% risk, risking a total of 2% in all the trades. This is just an
example, and there are multiple ways of doing this. Keep it as simple as possible,
though.
• Total risk exposure: 5% risk exposure at any time. No more than 5 trades if
risking 1%, or 10 trades is risking 0.5%. By risking less, I can diversify my portfolio
with 10 assets at 0.5% instead of 5 at 1%.
• Reward/Risk for each trade: 3 to 1, that is, exit once a profit of three times the
risk has been reached, for instance, once profit reaches $300 if $100 has been
invested.
• Monthly goal: 3-5%. If the goal is reached, stop trading for that month.
• Monthly drawdown (loss): 5%. If the maximum drawdown is reached, stop
trading for that month and go back to testing for at least 1 month.
• Maximum trades open at the same time: 5 trades. Risking a maximum of 5% of
my trading account.
• A new trade can only be opened if I protect one of the existing trades or one of
them has hit its target.
• Max of 2 losses in the same asset. If I have 2 losses in the same asset, I will stop
trading it for at least a month. Market dynamics might be changing if 2 valid high
odds imbalances have been eliminated.
• Max of 2 correlated instruments at any one time.

When to keep on trading if my goal has been reached

• Once my monthly goal has been reached, I will be allowed to risk one more trade
under very specific scenarios.
 • Take a trade only if it's a nested imbalance, that is, Daily imbalances within
Weekly and Monthly zones.
• No more than one trade at a time.
• If the trade is a winner, I will be allowed to take a new one until I get a loss. A loss
will force me to stop trading.

What to do when last month was a loss

• If last month has been a loss, next month's goal will be focused on recovering
from the loss. Be more conservative and avoid having a second losing month in a
row.
• What to do when there are two consecutive losing months (-10% drawdown):
• Stop trading for at least 3 months.
• Analyze the losses in detail and adjust the trading plan. Learn what went wrong
and fix the problem.
• Start a period of heavy backtesting for at least 3 months until I gain the
confidence to trade again.
• What to do if the price fell shy of reaching take profit, and I see strong past
obstacles or new ones being formed?
• Close the trade before the fixed 3:1 target is reached and wait for a new trading
opportunity.
• It's better to lock in profits rather than giving it all away. A bigger retracement
might happen. Evaluate opposing price action to make a decision.

When to move the stop-loss to breakeven?

Do not move the stop loss to breakeven. It's either a win or a loss. If price has been doing
nothing for a long time and started to range, closing the trade with less than the initial 3%
target could be an option.

What to do if the top timeframe of your sequence is out of alignment?

If the top timeframe of your sequence is out of alignment, no set and forget trades will be
possible. What to do?

1. Skip the asset and focus on others that are clearly trending.

2. Locate another sequence where there is s clear trend. Avoid lower timeframe sequences, noise
will end up blowing up your account.
Avoid trading against the trend or in out of alignment stages. Even the strongest levels in a
trending market are eliminated, guess what will usually happen to those imbalances created in
an out of alignment scenario.

Posting potential trades in OOA scenariios won't be discussed and it's not advisable. They won't
be supported or given any feedback.

What are the trade setups that I can trade in a trending market?

This trading plan only accounts for trades that follow a clear trend by applying the
realignment rules—all the trade scenarios listed below account only for long trades in
an uptrend. The same setups will be available in a downtrend. All the scenarios must
follow the realignment rules and the three timeframes of my sequence, where the top
timeframe will dictate the bias and direction of all my trades.

• Start with the monthly sequence using the Monthly as directional bias
and D1 and W demand levels as entry timeframes.
• This is Set and Forget trading. You will set and forget your entries if the market is
trending and the realignment rules still apply. Else you will need to wait for new
imbalances and use more advanced techniques.
Find below the the four bullish trading scenarios that you are allowed to trade in this
trading plan.

Top Middle Lower

Action
timeframe timeframe timeframe
Long at lower timeframe demand levels.
Uptrend Uptrend Uptrend
For example: M, W and D1 up --> Longs at D1 DZ.
Long at lower demand levels located inside middle
timeframe demand level.
Out of
Uptrend Uptrend
alignment
For example: M and W trending up, D1 OOA -->
Longs at D1 DZ nested at W demand.
Long at lower timeframe demand levels located
inside top timeframe demand level.
Out of Out of
Uptrend
alignment alignment
For example: M uptrend, W and D1 OOA --> Longs
at D1 demand zones nested at M demand level.
Long at the middle timeframe demand level located
inside top timeframe demand level.
Out of Out of
Uptrend
alignment alignment
For example: M uptrend, W and D1 OOA --> Longs
at W demand zones nested at M demand level.
Find below the four bearish trading scenarios that you are allowed to trade in this
trading plan:

Top Middle Lower

Action
timeframe timeframe timeframe
Short at lower timeframe supply levels.
Downtrend Downtrend Downtrend
For example: M, W and D1 down --> Shorts
at D1 SZ.
Short at lower supply levels located inside middle
timeframe supply level.
Out of
Downtrend Downtrend
alignment
For example: M and W trending down, D1 OOA -->
Shorts at D1 SZ nested at W supply.
Short at lower timeframe supply levels located inside
top timeframe supply level.
Out of Out of
Downtrend
alignment alignment
For example: M downtrend, W and D1 OOA -->
Shorts at D1 supply zones nested at M supply level.
Short at the middle timeframe supply level located
inside top timeframe supply level.
Out of Out of
Downtrend
alignment alignment
For example: M downtrend, W and D1 OOA -->
Shorts at W supply zones nested at M supply level.

If in doubt, do nothing or wait for new imbalances to be created.

Where can I see examples of valid and invalid trades?

Two channels have been created where we will post valid and invalid trades. These channels will
be updated from time to time. The new website has recently been launched, so these channels
have be to populated with older trades and new ones.

• Good trades examples

• Bad trades examples

The live channels have many more examples of valid and invalid scenarios that follow the rules.
Make sure you read them.
Trading all-time lows, IPOs and ICOs.

There are many times when there is a new stock (IPO) or a new crypto (IPO). These scenarios are
great opportunities to buy new stocks and cryptos. However, there are no bigger timeframes to
support the trade or an uptrend on the M or W timeframes.

There are three things that can be done in this scenario:

• Buy the whole imbalance or half of it.

• Wait for new smaller timeframe demand zones to trade off the bigger
timeframe demand zones.
• Do nothing, and wait for a more mature W and M uptrend. This is the wisest and
smartest approach.

There is nothing else that can be done. If you are unsure, focus on clearer setups that have more
historical data.

Take a look at a couple of examples.

The first one belongs to Li Auto #LI stock IPO. You can only buy at M demand zone #1. You can
use the full level or half of it.
The second example is a crypto: CKB USDT (Nervos).

There is a very strong W imbalance at #1. That's all the history available for this crypto ICO. You
can buy the full W demand level at #1, half of it, or wait for new D1 and H4 demand zones to be
created.