Ross Maxwell - Trade Plans

Ross Maxwell · Consulting · Beginner

In this video Ross deep dives trade plans. - He looks at why it is important to have a trade plan and how they help give you an advantage over other traders. - He explores how to review and update your trade plan so it is not stagnant. - The struggles that are often encountered when trying to implement or stick to a trade plan. - Finally, Ross breaks down a trade plan template. If you like the way Ross teaches and want to look at purchasing further tuition, access it through this link - https://keyzonetraders.learnworlds.com/link/rEugyh

Transcript

Okay, so welcome to the next session and this is going to be on trade plans. Okay, so this is a really really important document. You must have a plan uh in place when you start trading. It is the document that tells you what you're going to do, when you're going to do it, how you're going to do it. Uh and it really is vital that you have one of these in place.

Uh as it takes a lot of the decision- making away from you, you know, it becomes part of your subconscious and it's sort of like the the the document that gives you the direction. So you can almost try and put as much on autopilot as possible. Okay.

So when you set up a new business, you create a business plan, okay? To define the goals, to set out what your business is going to do, how you're going to achieve it. Trading is no different.

Your trading plan is just your business plan for your trading journey. Okay? It is essential. There is no business that sets out without a business plan. There is no trader that should set out without a trading plan. when follow when you follow your trading plan with discipline uh the trading plan will provide a structure that will keep you safe in the markets.

It basically you determine the the rules and the the structure of the trading will provide you an edge in the market. You write them down to give you the rules that actually creates that edge and then you need to execute that edge in the market. It helps maintain consistency across your trading decisions because it's a rational document that that that stops the emotions from hijacking your decision- making.

It should be and this is where this is one thing is a lot of people try to over uh complicate their trading plan. They think they've got to like like fill it full of loads of detail, every single minute detail, which is wrong. It needs to be clear. It needs to be simple. It needs to be decisive. And it needs to leave little room for ambiguity.

You shouldn't get to a situation in the markets where you're like, I don't really know what to do here. And then because that if you sit there and say that then you're going to base your decision from that moment based on how you're feeling in that moment. So it's going to create um variables within your decision making.

So I keep a I keep a hard copy printed on my desk of my trade plan, okay? And I review it every single day before trading without fail because it just really makes sure that it becomes habitual. It makes it part of my subconscious and therefore following the plan becomes effortless over time. I don't I get into situations in the market and I just act. I just do it out of pure habit.

I don't have to sit there and consider and think and what am I what does my trade plan say? Should I be doing this? Should I be doing that? It's just becomes very natural and that's the sort of um situation you want to get in.

have and by keeping a hard copy on your desk, you therefore can go review it all the time. You can go over it every single day and therefore it is going to become part of that subconscious much much quicker. Okay? And as the old saying goes, failing to prepare is preparing to fail. So what should you have in your trade plan?

We're going to go through this and then we're going to go and have a look at a uh template for a trading plan. I will give this to the guys and hopefully they can put it up within the um within the section so that you have access to a template that you can go away and use and fill out yourself as well. Okay. So, among other things, your trade plan should basically include your trading principles and rules.

Um and we're going to talk about this in a little bit more detail in a moment. A mission statement. So, what you're trying to achieve and why you're trying to achieve it. Do you always have the the knowledge and the ambition and the drive to to know what you're trying to achieve?

Because you know when you're struggling um it's very sometimes it's very difficult to see through the clouds and really understand why you're trying to achieve what you're trying to achieve. Whereas if you have that written down that can be motivation to really find that clarity and keep on going. You want to set out daily routines. You want to obviously have the strategies that you're going to trade.

Alongside this, you need to determine the risk that you're assigned to each strategy. You want to set out your short, medium, and long-term goals. And this is this is really key as well.

You don't just want to sit there and say, "Okay, um I want to become a professional trader earning x amount of pounds per per year or per month or whatever it is because you know that that goal could be a long long way away." And there's a saying that I love which says, you know, don't focus on a mountain, focus on the next 10,000 steps.

And if you stand at the bottom of a mountain and you look up, you know, that is a long long way away. And you might do a whole day's trekking and you look up and it's still a long long long way away. You do another day's trekking, you look up, it's still a long long long way away. Your your knees are starting to ache. You know, your back's aching a little bit and you're like, do you know what?

I can't be bothered with this. I'm going to turn back. like that's still miles away. But if you have a plan that says right, okay, you know, day one we're going to get here. Day two we're going to get here. You know, maybe we'll rest a little bit to just let that knee recover. Um and then like on the third day we're going to get to here and then the fourth day here.

You and you you set it break it down into a series of shorter term goals. It doesn't really matter where the peak is because you are on target to achieve getting to the top.

So, if you just focus on the next 10,000 steps and then do another 10,000 and then do another 10,000, eventually you're going to get to the top of that mountain. And that's the same in trading. You need to set short, medium, and long-term goals, which will make the long-term goals much more achievable.

You also want to, especially whilst you're in the the learning phase, and we're all we are all still learning in the markets. We're all still learning in life, right? But certainly in the uh in the beginning, you want to set out how you're going to um set out your education and how you're going to learn.

I still in my trading plan set out how I'm going to test strategies, how I'm going to dedicate time to um like going into trading simulators and stuff like that. So that is my education. Looking for uh ways to improve the edge, looking for new strategies, looking for new edges, looking to to remain dynamic and keep learning more about the markets. So you want to include that in your trading plan as well.

Now you also need to review your trading plan uh because your first trade plan isn't going to be your last. It's going to evolve over time. You know if if it was easy just to write out your first trading plan and that be it then it would be a lot easier and everyone would be doing it. So you need to review your plan regularly to identify areas that you can improve.

I would aim to [clears throat] review at least once a month. um maybe a little bit more regularly at first, but sort of as you go on. I still review by every month. Quite often I don't need to make any tweaks um anymore. Um but I still review it to make sure that I'm uh I'm doing everything that I I say I'm going to do. Um see if there's any tweaks that need to be made.

Um this is one thing you do need to be careful of though is you want to avoid tweaking it too much. Just because something doesn't work for one month doesn't mean to say it's not going to work the next month doesn't mean to say there's something wrong with it. It could just be a period in the market. So if you tweak it constantly, then you're going to create inconsistency.

You're not really going to give your trading enough time to develop to work out what is working and what's not. So there's like this fine line and a bit of a balance. And this is why it takes time. You know, if it was uh if it didn't take time, you know, it would be it would be a lot easier.

But you want to get the balance between making sure that you allow the trade plan to establish whether it has an edge um but you also want to tweak it to make sure that edge is refined and and as uh as optimal as it can be. Okay. And you know obviously when you start there's going to be more tweaking than as you progress through your journey as well.

And as I said a strategy that underperforms in the short term might still be valid. So review it, but you don't always need to react to it. You only react when there is hard data and hard evidence and clear evidence that that strategy needs to be uh reviewed and edited and tweaked. So adjustments are obviously likely more likely in the early stages of your journey.

Uh and demo accounts and simulator tradings are are ideal for test environments to ref to refine your plan in the early stages safely. Okay. So um one of the big struggles the treat that people have is to create a trade like so creating a trade plan is relatively straightforward but many people still struggle to follow it. They don't have the discipline to actually follow the plan.

Um you have to build that discipline [clears throat] uh and make the process habitual and I've spoken a little bit about how you can do that. A clear and detailed trade plan limits variables and removes ambiguity helping us to follow instinctively.

again taking away the emotions from our decision making in our trading. We want to review the plan before each session to help imprint it into our subconscious so we know what we're doing when we're going into each session.

Uh and also set up some pre-market routines like calculating your leverage in advance, how much you're going to risk per trade, reduce the critical decisions during the session so that because again our human mind only has the ability to make a certain number of decisions a day.

So, you don't want to get into um critical moments of your trading and and start um feeling like decision fatigue where your brain is so tired from having to already made other decisions that it can't make really focused clear decisions in that moment.

So take as many of those decisions as possible uh and make them uh routine, make them robotic, make them part of your subconscious things like you know the the the rules of your setup you so you know exactly what it is very clearly defined uh entry exit take profit targets where your stops going to be how much you're going to risk in terms of capital for trade. None of those sorts of things.

You shouldn't have to think, you should not have to think about those sorts of things when you're entering the trade, when you're actually executing your trade. They should all be detailed in your trade plan. So, I just want to take a quick look at this uh template and like I say, I will put give this to the guys so that you can uh hopefully have access to it.

You know, [clears throat] your name trading plan doesn't need to be anything fancy. Just the name, your name, trading plan, mission statement. As I say, make it and and and and have this and go through it regularly as well so that you're motivated, especially when you're going through times when you're questioning yourself, you're questioning a strategy, know why you are doing this and what you're trying to achieve.

Be clear about this. Doesn't have to be really detailed, just a couple of sentences, couple of lines to know why you're doing it to make sure you're motivated to stay on track and stay disciplined to your rules. Then your trading rules and principles, right? you know, you'll have set times at which you're going to want to be trading. You want to determine when you will trade, when you won't trade.

You know, we don't go to A lot of traders seem to feel because they can do it from their laptop, even if they don't feel well, they're going to carry on trading because it's so easily accessible. But the fact of the matter is if you are ill, one, your cognitive resources are drained. You wouldn't go into work ill.

Why would you trade when your cognitive resources are train drained and you're not going to be sharp and at 100% like you need to be? Okay. Um any other routines that you want to follow like making, as I said, making sure you read your plan. I mentioned before, you know, maybe you want to do some stretching, maybe you want to exercise in the morning.

I personally am a big advocate for mindfulness and meditation before you start trading as well. It's it the benefits for it are huge. Um so these sorts of routines and principles that you want to make sure that you follow them in your trading um risk management and draw max draw downs stipulate your maximum risk per trade uh here and you also want to set your loss limits for the day, week and month.

Now there are some people that sit there and say you should set profit targets as well for each day, week, month. Personally I'm not a big fan of this. Okay, we have an edge in the market. Um, when the market is running well for us, when the um the edge is on a hot streak, why would as long as we're following the parameters of our plan, why would we limit ourselves on how much we can make in the markets?

However, you know, if we are we need to protect our capital, which is why we need to set loss limits. So, have an amount that you set for the day, the week, the month. that might be 2% per day, 5% per week, 10% per month as a guideline. If you hit those loss limits, you stop trading uh and you need to review your trading and make sure that you're not doing anything wrong before you start trading again. Okay?

Um that's really vital because then you're um making sure that it's not you, it's just the strategy playing out a normal draw down. uh and but but set some loss limits so that you're protecting your capital and making sure that you're following all the right correct processes. You then want to uh set those short, medium, and long-term goals as I mentioned uh in the in the main session.

Uh your strategy, the name of the strategy, the amount you're risking per trade, the time frames you're going to trade it on, the markets you're going to trade, and then some simple rules that you need to follow, where your take profit's going to be, where your stop loss is going to be, how you're going to enter the market.

Once you have that, you have the framework to be able to follow, rinse, repeat, follow, rinse, repeat, and you have something that you can refer back to so you can then analyze and review your performance to make sure you're doing exactly what you need to be doing that that has suggested that you have an edge in the market. And then finally, you want your to to outline your processes and reviews.

Okay? So detail any other relevant principles, risk management techniques, uh who you are as a trader, what style of trader you are, how often you're going to review your tra your journal and your plans, and how you will continue your education to prove your trading. All of these things will hold you accountable to be able to continue to review and become a better trader.

Okay? And there's um a story that I remember from reading many years ago and it was about a coach. It was a tennis coach who coached young children. Okay.

And they said the one they could see the one the the the players that were going to make it and progress further not because they were the most talented at a young age but they identified their weak they were they were able to identify their weaknesses in their game and they saw that as an opportunity to improve themselves.

Now, having a trade plan and being able to review our trading using our trade journals, which again we're going to cover in another session, that is being us being able to identify our weaknesses and become better traders.

Okay? And therefore that is going to make us better traders in the long term.