Furu To Guru

Core Principles

Your #1 job in trading is to make great trades.
Great trades are mainly a function of four things:
1. Stock Selection (Focus)
2. Trade Analysis (Directional Bias)
3. Trade Timing (Patience, Entries, and Exits)
4. Position Sizing (Bet Risk)
Your second most important job in trading is to Review your trades.
Review. Learn. Adapt.
The only way to do these 2 very important jobs is to become a rules-based trader. Failure to do so 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. Patience pays.
Then after the trade, do an after action review.
Become a rules-based trader and always do your 2 most important jobs, or watch as your account dwindles and dies.
In general, Stock Selection (Focus) and Trade Analysis (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 Trade Analysis (Directional Bias), they still crush it.
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). First, did you close all open orders? Then write about the trade for 5 minutes. What did you do wrong? What did you do right? Review. Learn. Adapt.
- Build a massive mental model with thousands of reps.
Have fun, play. "Play is the highest form of research." - Albert Einstein.
Did you get your reps in today? Consistency is King.
Focus your attention on the things that matter. Find securities with the most attention, volume, and news or great pattern context.
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.
The best Traders are the best Waiters.
Let the market decide entries and exits. Not your emotions. Is this a picture perfect setup, entry, or exit? No? Then don't do it.
Not sure? Don't know? Don't trade. Wait for a picture-perfect setup, entry, or exit. Stop wasting your time and energy on bad setups, entries, and exits.
Don't blindly follow someone else's trade. Follow your rules and do your job first. Or you will learn nothing, and destroy your account.
Know where you're getting out before getting in.
Trades should go in your favor right away, or at least within a bar or two. If not, there's a problem. The market is saying your directional bias is probably wrong, at least for now. Listen. Adapt.
Did you just exit a trade? Then do an AAR. Did you close all open orders? If you can't do an AAR now, do it by the end of the day. No exceptions.
You can't get better if you don't know what you're doing wrong.
Scared? Don't want to take a great trade? Trade smaller 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?
Did you check your PNL during a trade?
If so, you're wrong. Trade the chart, not your PNL or emotions.
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?
Don't stare at price action and overanalyze. Set alerts near entries, stops, and targets. Then 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.
If you're in a trade fighting price action, you're probably wrong. A trade should work quickly in your favor. A deeper pullback or 2nd entry is probably required to align with your HTF bias. Otherwise, your HTF is likely wrong.
Scared of missing a move? Don't force a trade that doesn't have a great setup. Wait for a great trade, or your account will die.
Missed a trade? Don't chase. This is an opportunity, learn from it. What'd you miss? And don't beat yourself up. You'll just make 5 more bad trades. There are thousands more great trades coming, so you better get ready for them.
Try to trade with the overall market, not against it. 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?
Take care of your mind, body, and soul. If you're physically and mentally unhealthy, expect that to significantly degrade your ability to make great trades. Sleep. Exercise. Eat well. Nurture relationships.
Comparison is the thief of joy. Don't compare your Chapter 2 progress to someone else's Chapter 20. Just try to get a little bit better today than you were yesterday. Get your reps in. Learn. Adapt.
Where is the next explosive trade level?
What's a great entry that may fail and trap traders?
Biggest drivers of free markets:
- Price Context (Overall Market, HTF, then TTF)
- News, Story, Catalysts, and Sectors in Play
- Past Flows, Positioning, Supply v. Demand
- Current Flows, Liquidity, Supply v. Demand
Pre-trade checklist:

Grade every setup. Is this an A setup, B setup, or bad setup?
Is there a news catalyst? Sector theme? Or just TA?
Overall Market pattern, pushes, and RT analysis (e.g., QQQ, SPY, etc.)
Is it clear? Write it down.
HTF pattern, pushes, and RT analysis.
Directional bias and target? Aligned with the Overall Market? Write it down.
TTF pattern, pushes, and RT analysis.
Directional bias and target? Aligned with HTF? Or is HTF trash? Write it down.
Is this a great trade?
A picture-perfect entry or exit?
If not, don't do it. Stop wasting your time, money, and energy.
What's the Entry or Exit Price?
What's the Stop Price?
What's the Trailed Stop Plan?
What's the Target(s) Plan?
Use Options, Shares, or Futures?
Bet Risk?
What are you willing to lose on this trade?
Position Size?
Based on the distance from entry price to stop price and your chosen bet risk on the trade.
Order Type?
Limit, Market, Stop, or Stop Limit?
Time in Force?
Day, GTC, or 24 hours?
Is the Market about to close or near the weekend (Friday)?
Is major news or economic event soon? Earnings, fed talk, etc.?

Stock Selection and Focus

Grade every setup. Is this an A setup or B setup? Neither? Then it's a bad setup. Period.
Focus your attention on the things that matter:
Massive attention and volume?
Major News catalyst like a PR or earnings?
Great chart pattern context?
This Sector in play? What are the sector sympathy plays?
Percentage gainers/losers today?
Above average relative volume today?
Create a watchlist.

Trade Analysis (Overall Market, HTF, and TTF)

Overall Market Analysis (e.g., QQQ, SPY, etc.)

The Overall Market is King and drives all trade analysis. A rising tide lifts all boats, and vice versa.
TA. TLs, key levels, pattern, pushes, bar quality, and follow through.
Overall market pattern: Bull Trend, Bear Trend, Trend Acceleration Up/Down, or Trading Range?
Directional bias and target?
Write it down.

Higher Timeframe (HTF) Analysis
- HTF drives TTF analysis and trades.
- TA. TLs, key levels, pattern, pushes, bar quality, and follow through.
- Directional bias and target?
  Should you be looking for longs or shorts? Don't know? Don't trade.
- Write it down.
Trade Timeframe (TTF) Analysis
- TTF trades must align with HTF analysis.
- TA. TLs, key levels, pattern, pushes, bar quality, and follow through.
- Directional bias and target?
  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, both support and resistance
Pushes, 1-4
Bar quality, strong closes (conviction) or wicks (hesitancy)
Tightness/strength of a trend (or lack thereof)
Follow through
200 SMA
Splashy price action, quick moves up or down = panic. Could be shorts scared or longs scared. Or traders desperate to join a move = conviction. Determine which it is.
Trend Retracements (RTs), 25% 50% 75% or 3-4 Pushes to DB DT BOPB HNS or RT swing high low BO
Update TA at least every 5 bars:
- UTLs, DTLs, DBs, DTs, BOPBs, HNSs, RBOs, pushes, your trailed stops, and targets
- The current Bulls stop and Bears stop
- HTF and TTF
- Review updates
If a trend has gone on for more than 3 pushes, the probability of a retracement is very high, even if the RT is only 10-25%.
Where is the Bull's stop? Bear's stop?
Strong moves and big bars usually get 2nd moves, especially 1st pushes.
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

Patterns and Playbook

Fundamental Patterns:
1. New Trend
2. Trend Reversal RT
3. Trend Resumption
4. Great Entry Fails Stop Out Panic or Squeeze
Playbook:
BO Close or PB 2PB RBO New Trend
Horiz/Diag TL BO Close or PB RBO 2RBO or 2PB RBO New Trend
Horiz/Diag TL BO then PB to BOPB HNS DB DT then New Trend Resumption
Horiz/Diag TL BO Fail RBO 2RBO Trend Resumption
Trend RT 25% 50% 75% or 3-4 Pushes to DB DT BOPB HNS RBO or RT swing high low BO then Weaker Trend Resumption
Trend RT then Resumption Fail RBO 2RBO then more RT
Blow-off Top/Panic Washout (Strong Trend Accelerates) RBO 2RBO Reversal to Trend RT 25% 50% 75% or 2-4 Pushes
3rd 4th Push RBO 2RBO Trend Reversal to Trend RT 25% 50% 75% or 2-4 Pushes
Great Pattern and Entry Fails Stop Out or wait for BO PB RBO 2RBO, Trapped Traders

Entries

If you can't explain your pattern, entry, and stop, you failed. You're not a rules-based trader anymore. You must be able to say out loud the pattern you see, the entry that aligns with one of your playbook trades, and the stop to protect your account. If not, you're doomed.
Signal bar quality? Bear or bull bar?
BO limit or close
BO close then PB 2PB RBO
BO close then PB to BOPB DB DT HNS RBO then RBO 2RBO
RBO 2RBO 3-4 Pushes RBO 2RBO
RT swing high low BO
Bar close
First entry RBO or second entry 2RBO?
Wait for a good entry stop out?
Know where you're getting out before getting in.
Combine 2 patterns for an entry, aka a double tap.
Let the market decide entries and exits. Not your emotions.
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.
Do the pre-trade checklist. No exceptions.

Stops, Trailed Stops, and Position Sizing

Know where you're getting out before getting in.
Mark it on the chart.
No one gives a shit about your stops because of your small position size. If you trade big fine, they do care, but I'm talking top 1% trader big. Otherwise, the market doesn't give a flying fk about your small size stop order. Experiment with stops then. You have the luxury of doing so while you trade small size. And you will learn what works and what doesn't for you. And how little the market gives a shit about your pathetic small position stop.
Use hard stops at all times (stop limit preferably). A mental stop on a single trade with breaking news can blow up your entire account.
There are tricks you can do with stops but they are only available to advanced traders with thousands of hours of experience and who trade large position sizes.
Prior swing high low
Prior bar or entry bar high low
Trail stop to lock in profits and reduce risk along the way. You can always get back in.
Mark it on the chart.
Strong moves get 2nd moves, especially 1st pushes. Be careful stopping out too soon.
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 DB DT BO Fail RBO 2RBO reversal
Trail to Big bar close or 2RBO near a target
Trail to TL BO reversal
1 tick BO stop or require at least a small push after BO?
Bet risk? How much money are you willing to lose if your stop is hit? Including commissions and exchange fees. You don't have to bet huge to have a great trade. You can bet huge once you've proven you know how to make great trades.
Position sizing? Based on the distance from entry price to stop price and your chosen bet risk on the trade.
Set alerts and targets, don't stare at PA. Then do something else. Listen to music. Watch a video. Listen to a podcast. Go for a walk.
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

Strong moves usually get 2nd moves, especially 1st pushes. Be careful exiting too soon.
Next key Horiz/Diag TL (OHLC, limits, nearby closes):
DB, DT, BOPB, HNS, RBO, Diag TL
2nd push 3rd push 4th push RBO 2RBO
Big bar close or 3-4 bar spike 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. Then do something else. Listen to music. Watch a video. Listen to a podcast. Go for a walk.
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 Reviews (AARs)

The #1 problem most traders face is failing to be a rules-based trader. Taking bad trades not in the playbook. Trading too big. Not using a stop or respecting the stop. Chasing moves with bad entries because of FOMO. Revenge trading to try and make up for a loss.
Do not revenge trade. Do not scale up and overtrade trying to make back a loss.
Did you just exit a trade? Then do an AAR. Did you close all open orders? If you can't do an AAR now, do it by the end of the day. No exceptions.
You can't get better if you don't know what you're doing wrong, or doing right.
Write about the trade for 5 minutes.
What did you do wrong?
What did you do right?
How was your Stock Selection (Focus)?
How was your Trade Analysis (Directional Bias)?
How was your Trade Timing (Patience, Entries, and Exits)?
How was your Position Sizing (Bet Risk)?
Did you follow your trade plan and rules?
Victory in trading is simply following your trade plan and rules. So even if the trade lost money, you still achieved victory if you followed your trade plan and rules.
Did you check your PNL during a trade?
If so, you're wrong. Trade the chart, not your PNL or emotions.
Create an improvement plan for the next trade.
Do less of what you did wrong.
Do more of what you did right.