Mr Subliminal's Remote Trading Journal

Following is the first draft of a bare bones trading plan for the ES. It is my intention to resume trading 1 ES contract tomorrow. I appreciate the encouragement and advice I have received both openly and in private.


Instrument to be traded
E-mini S&P 500 (ES)

Hardware
Dual monitor (17"+19") PIII 866MHz, 256 MB RAM, DSL VPN connection, TV (CNBC, CNN etc.)

Software
X_Trader, NexTrend. During actual trading, only X_Trader is open. NexTrend is used to obtain a visual feel before, after and during (between trades) the trading day with 1m and 5m charts of ES and NQ (E-mini Nasdaq-100).

Trading Style
Discretionary, intraday, scalping, mainly trend following, based on price action. Intraday (5m) trend of market used to determine bias of direction to be traded. Special focus on selectivity of trades.

Trading Rules
  1. Intraday only - definitely no overnights, even for profitable positions.
  2. Generally, no positions to be opened before 9:30am. More selectivity to be exercised during the midday doldrums.
  3. Maximum contract size (MCS) = Equity / 5000, rounded to lower integer for (Equity < $30,000).
    MCS = 5 for ($30,000 <= Equity < $42,000).
    MCS = Equity / 7000, rounded to lower integer for (Equity >= $42,000).
    Maximum value of MCS is 10.

    eg. for $18,000 account, MCS = 3.

    This is based on the CME Current Initial Spec ES margin requirement of $3,563 - any future changes will result in proportional readjustment of the MCS parameters above.
  4. The only factor to be taken into account during trading should be the short term (5m) trend and not any preconceived ideas no matter how well-founded, nor other people's opinions.
  5. Entry, in the direction of the short term (5m) trend, should be taken when there is indication of a continuation of the trend as per the SOMP indicator. In non-trending periods, use SOMP to selectively play the ranges. The position size should be for MCS and not scaled in.
  6. l, the maximum stop loss, is 2 points and p, the profit target is 2 points. In any event, MCS*l should not be greater than Equity*2%.
  7. Full exit to be taken when stop loss is reached without exception (ie. at price e-l, where e is average entry price).

    Full exit to be taken upon reaching the profit target (e+p).

    (Exit strategy that takes into account different market conditions to be developed.)
  8. A position should not be immediately reversed (after stopping out) only in extenuating circumstances.
  9. Cease trading for the day should the daily loss equal or exceed MCS*10 points.
    Cease trading for the week should the weekly loss equal or exceed MCS*20 points.
    Cease trading for the month should the monthly loss equal or exceed MCS*40 points.

    Cease trading for the day for any deliberate breach of 1 to 8 above.
  10. Cease trading for the day after a MCS*4 point (or greater) retracement from the day's maximum realized profit provided the actual (end of day) profit is at least MCS*6 points.
  11. In the event of an execution error, such as buying instead of selling, the error should be reversed immediately, and if the original trade criteria are still valid, the correct trade should be entered into without too much mulling or regretting.
    [/list=1]
    Miscellaneous
    1. A trading log will be maintained daily.
    2. This Trading Plan is a work in progress to be modified continually.[/List=1]
 
I've really enjoyed your journal, and hope you become the trader you want to be.

I'm a little curious why you have set a 1R goal. Wouldn't you be better of waiting for setups that lead to higher probability of larger gains (>3R), instead of punting for pikes? Wouldn't the extra leverage (5 contracts) that you use on ocassion be put to better use playing those "special" setups?

Give my regards to Bubba.
 
Difficult trading conditions for me at least and I was neither selective nor focused. The little I can be happy about is the very high likelihood that the daily stop loss prevented this from degenerating into another debacle. Believe me, this is one of the few times in my life I have voluntarily stopped after a loss - wouldn't have been able to do it without the trading plan and the thousand watching eyes.

-10.75 pts / 22 RT / 1 ct
 

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