Make great trades. Avoid bad ones.
Get high quality reps in. Consistently.
Money follows.
"We are what we repeatedly do.
Excellence then is not an act, but a habit."
— Aristotle
"Success lies in relentless execution of the basics.
And simplicity is the ultimate sophistication."
— Leonardo da Vinci
"Stay in the game long enough to get lucky.
The big money is not made in the buying or selling, but in the waiting.
Also, I can't think of a single example in my lifetime
where 'keeping it simple' worked against us."
— Charlie Munger
"The stock market is a device for transferring money
from the impatient to the patient."
— Warren Buffett
Your #1 job in trading is to make great trades. Great trades are a
function of:
Stock Selection and Focus
Trade Analysis (Directional Bias)
Trade Timing (Entries and Exits)
Position Sizing (Bet Risk)
The only way to do these well is to become a rules-based trader.
Failure to become a rules-based trader who makes great trades will
result in your account's death and destruction. So before every
trade, ask yourself, "Is this a great trade?" If not, don't trade.
You are either a rules-based trader, or not. Period.
In general, stock selection/focus and directional bias can solve a
majority of bad trading problems. A surprising number of great
traders make many mistakes in trade timing and position sizing. But
since they nailed the stock selection/focus and the directional
bias, they still crush it.
Have fun, play. "Play is the highest form of research." — Albert
Einstein.
You gotta do the thing to get good. Practice and review. One hour of
doing is worth more than 10 hours of consuming:
Create a playbook of your best trades, then continuously add
stock chart examples of each.
Practice your playbook trades and technical analysis via bar
replay. Talk it out and write it down. Sit and wait for a
playbook trade to show up. Or a stop to hit. Or a target to hit.
Sitting is doing — it's patience — and where the big money is
made.
Create a trade plan. Identify the ideal entry, stop, trailed
stops, and targets.
Do a pre-trade checklist. No exceptions.
Trade the plan (real or sim), no exceptions. Let the market
decide entries and exits, not your emotions. Victory in trading
is just following your plan and rules. You are a rules-based
trader remember? Results follow. Is this a picture-perfect
entry/exit? No or don't know? Don't trade.
Do an After Action Review (AAR). What'd you do wrong? What'd you
do right?
Build a massive mental model with thousands of reps.
Scared? Size down or don't trade. Or sim trade it because you need
more practice and reps. What trading task are you actually willing
to do right now so you can get more reps in, however small?
The big money is made in the sitting and waiting — it's patience,
and patience pays. Waiting for a playbook entry. Waiting for a stop
or target to hit.
If you're staring at PNL or checking it constantly, you're wrong.
Let the chart decide. Let the market decide. Not PNL. Not your
emotions. You're authorized to check PNL after the trade, not
during. No exceptions.
I'd rather be late and right, than early and wrong. Patience pays.
What do you actually want to see happen for you to get in? To get
out?
Let the market decide entries and exits. Not your emotions. Is this
entry/exit picture perfect? If not, don't do it.
Know where you're getting out before getting in.
Don't stare at price action and overanalyze. Set alerts near
entries, stops, and targets. Do something else. Listen to music.
Watch a video. Listen to a podcast. Go for a walk.
If you can't trade small, then you definitely can't trade big.
Missed a trade? Don't chase. And don't beat yourself up. You'll just
make 5 more bad trades. Relax, get back up, dust yourself off, and
wait for the next great trade. There are thousands more coming. So
you best get ready to conquer them.
Try to trade with the market, not against. Roughly 80% of stocks
trade with the market. A rising tide lifts all boats, and vice
versa.
Don't do this alone. Your environment — especially the people around
you and the content you consume — can make all the difference
between success and failure.
Diversify your mental health. You will lose a lot in trading. So
what other hobbies or things can you still get victories in today?
Comparison is the thief of joy. Don't compare your Chapter 2
progress to someone else's Chapter 20.
You can't get better if you don't know what you're doing wrong. So
do after action reviews to find lessons learned. What'd you do
right? What'd you do wrong? Make a plan to fix what you did wrong,
and do more of what you did right.
Focus. Find the most attention, volume, and news or great pattern
context.
Not sure? Don't know? Don't trade. Wait for a picture-perfect
entry/exit.
Where is the next explosive trade level?
What's a great entry that may fail and trap traders?
Pre-trade checklist:
Is there a news catalyst? Sector theme? Or just TA?
HTF pattern, pushes, and RT analysis. Write it down.
TTF pattern, pushes, and RT analysis. Aligned with HTF? Write it
down.
Is this a great trade? Picture-perfect entry or exit?
What's the entry/exit price?
Where's the stop?
Bet risk? What are you willing to lose on this trade?
Position size, shares, contracts?
Buy or sell options? Or shares? Or futures?
Order type: Limit or Market?
Time in force: Day, GTC, 24 hours?
EOD, Friday/near weekend?
Major news or economic event soon? Earnings, fed talk, etc.?
Biggest drivers of free markets:
Price Context, especially HTF, then TTF but also overall market
cycle (bull market, bear, or range).
News, Story, Catalysts, and Sectors in play.
Past Flows, Positioning, Supply v. Demand.
Current Flows, Liquidity, Supply v. Demand.
Stock Selection and Focus
Any news catalyst like a PR or earnings?
Massive attention and volume?
Is this Sector in play? What are the sector sympathy plays?
Percentage gainers/losers today?
Above average relative volume today?
Create a watchlist.
Perform TA and Trade Analysis. Set alerts at key levels.
Trade Analysis (HTF and TTF)
Higher Timeframe Analysis (HTF)
HTF is King, and drives all analysis and trades.
Overall market pattern (Bull, Bear, Range)? E.g. QQQ or SPY.
Major technical breakout or clear pattern?
TA. Key levels, pattern, pushes, bar quality, and follow
through.
Trade analysis and bias. Should you be looking for longs or
shorts? Don't know? Don't trade.
Write it down.
Trade Timeframe Analysis (TTF)
TTF trades must align with HTF analysis.
TA. Key levels, pattern, pushes, bar quality, and follow
through.
Trade analysis and bias. Should you be looking for longs or
shorts based on HTF trade analysis? Don't know? Don't trade.
Write it down.
Technical Analysis (TA)
Horizontal TLs: most touches or key levels (DB DT BOs BOPB HNS RBO)
Diagonal TLs, Trends: UTLs, DTLs, the widest 3 points, and both
support and resistance
Trend RT 25% 50% 75% or 3-4 Pushes to DB DT BOPB HNS or RT swing
high low BO
Pushes
Bar quality
Tightness/strength of a trend (or lack thereof)
Follow through
200 SMA
Update TA, trailed stops, and targets on HTF and TTF at least every
5 bars. Review updates.
Patterns:
BO Spike Close or PB 2PB RBO New Trend
Horiz/Diag TL BO Close or PB 2PB RBO New Trend
Horiz/Diag TL BO then PB to BOPB HNS DB DT then New Trend
Continuation
Horiz/Diag TL BO Fail RBO Trend Continuation
3rd 4th Push RBO Reversal to Trend RT 25% 50% 75% or 3-4 Pushes
Trend RT 25% 50% 75% or 3-4 Pushes to DB DT BOPB HNS RBO or RT
swing high low BO then Trend Continuation
Trend RT then Continuation Fail RBO then more RT
Blow-off Top RBO Reversal to Trend RT 25% 50% 75% or 3-4 Pushes
Great Entry Fails Stop Out and Trapped Traders
Where is the Bull's stop? Bear's stop?
Strong moves and big bars usually get 2nd moves
Strong moves and big bars leave orders behind that get filled during
PBs
Where has price come from? Spike, trend, or trading range?
Price moves from line to line, major battle to major battle
Potential future diag TLs
Wicks do the damage. Closes tell the story.
Logarithmic charts
OHLC and RBOs for TLs
Entries
BO Limit or Close
BO close then PB 2PB RBO
BO close then PB to BOPB DB DT HNS RBO then RBO
RBO 2RBO 3-4 Pushes RBO
RT swing high low BO
Bar Close
Know where you're getting out before getting in.
Combine 2 patterns for an entry, aka a double tap.
First entry or second entry? RBO or 2RBO?
Is this a picture-perfect entry on TTF and HTF? If not, don't do it.
Don't know? Don't trade.
I'd rather be late and right, than early and wrong.
Let the market decide entries and exits, stops and targets. Not your
emotions.
Bet Risk on Trade / Points to Stop = Share Size
About to enter a trade? What are you willing to risk? How many
points to the stop? Share size?
Shares or options? Why?
Before entry, double-check size, DTE, spreads, near EOD, 2:50 on
close orders, or Friday
Stops, Trailed Stops, and Bet Risk
Know where you're getting out before getting in.
Prior swing high low
Prior bar or entry bar high low
Trail stop to lock in profits along the way and reduce risk. You can
always get back in.
Trail to new swing high low created by a BO
Trail to new bar high low (e.g., entry bar)
Trail to Breakeven or EOD
Trail to 1st push RBO, 2nd push RBO, 3rd push RBO
Trail to Big bar close or 2RBO near a target
Trail to BO spike reversal
1 tick BO stop or require at least a small push after BO?
Update stops and targets on the chart after BOs
Bet size? Dollar Risk on this trade you're willing to lose?
Including commissions and exchange fees.
Set alerts and targets, don't stare at PA. Do something else. Listen
to music.
Respect stops to protect your account and lock in profits along the
way. No exceptions. You can always get back in.
Have Patience, let the market decide entries/exits, not your
emotions. Is this a perfect picture exit? No? Don't do it.
Targets
2nd push, 3rd push, 4th push RBO
OHLC limits or nearby closes/RBO at key Horiz/Diag TL tests:
DB, DT, Major Prior BO, TL, BOPB, RBO
Big bar close
Scale out along the way in partials. E.g., 1/4 position at a target,
then another 1/4 at the next target, etc.
Update stops and targets on the chart after BOs.
Set alerts and targets, don't stare at PA. Do something else. Listen
to music.
Respect targets to lock in profits along the way and reduce risk. No
exceptions. You can always get back in.
Have Patience, let the market decide entries/exits, not your
emotions. Is this a perfect picture exit? No? Don't do it.
After Action Review (AAR)
Lessons learned.
What'd you do wrong?
What'd you do right?
Next time, do less of what you did wrong, do more of what you did
right.
Let the market decide entries and exits, not your emotions. Patience
pays.
Don't know? Don't trade.
Scared? Trade smaller or don't trade. Or sim trade to get more reps
in.
Patterns are useless without a boss stop placement.
Therefore, every pattern and entry must be paired with a great stop
placement and trailed stop placement.
In general, use the previous swing high/low, then trail to the new
swing high/low.
Oil / CL Futures
1) Blow-off Top RBO Reversal to Trend RT 25% 50% 75% or 3-4 Pushes
QBTS
1) 3rd 4th Push RBO Reversal to Trend RT 25% 50% 75% or 3-4
Pushes
2) Horiz/Diag TL BO then PB to BOPB HNS DB DT then New Trend
Continuation
3) Trend RT 25% 50% 75% or 3-4 Pushes to DB DT BOPB HNS RBO or RT
swing high low BO then Trend Continuation
QQQ
1) Great Entry Fails Stop Out and Trapped Traders
2) Trend RT 25% 50% 75% or 3-4 Pushes to DB DT BOPB HNS RBO or RT
swing high low BO then Trend Continuation
Bitcoin / BTC
1) Great Entry Fails Stop Out and Trapped Traders
Disclaimer: Most traders fail. Most traders lose all or
most of their money trading. This is not financial advice. Nothing on this
site is a recommendation to buy or sell any security. This is my
degenerate trading strategy.
Read at your own peril.
