BarroMetrics Views: Execute Plan
John dropped me a line asking: “I have problems entering according to my plan. I pull the trigger either too late or too early!”.
Interestingly, the problem is not an uncommon one. I am seeing it repeated in the current crop of Ultimate students.
Firstly, make sure you do have a problem and are not merely falling prey to hindsight bias i.e. ‘too late or too early’ is defined by what the market did after you entered.
Secondly, if you are not executing as planned, take steps to define clearly what has to happen to enter a trade. For example, the statement below would be inadequate. :
I’ll enter at my buy zone when I see a bullish conviction bar
Better would be:
I’ll enter after the market hits my buy zone, 1.3500 to 1.3510 at the close of a 30-minute bullish conviction bar. The maximum price I’ll pay is 1.3520. If the bullish bar closes above 1.3520, I’ll place a limit order at 1.3520.
If the market fails to hold 1.3500, I’ll stand aside for today and review my options for tomorrow.
Let’s see why the latter statement is better:
- It defines the buy zone. So, no action is taken until the zone is hit. It also means you may miss a trade if the market gets to 1.3511 and bounces. Accept that you will miss trades because a market fails to get to your zone.
- It defines the entry timeframe.
- It provides a plan in the event the market bounces strongly off the buy zone.
The key is we define our entry conditions as clearly as possible. Once that is done, I recommend you spend a few minutes, visualising entering the market – include scenarios, where the market throws you a curve, e.g., hits the zone, closes above 1.3520 and never retraces. It’s important to accept the scenario ahead of time.
The reason we circumvent our plan is usually due to the fear of missing out – the 3Fs (flight, fight or freeze) raise their heads. Speaking of which, on Monday, August 11, we’ll be providing a link to a podcast with Les Meehan, trading psychology coach. Don’t miss listening to the interview (it’s only 15-mins long). Les is providing a special free offer – details Monday.
Also, he is conducting a webinar on Thursday, Aug 11 at 13:30 EST (that’s 1:30 Singapore time, Friday, August 12): Engineering Your Trading Mindset for Success.
Now 1:30 is a wee too early for me (at least normally) living in Hong Kong. But, if you register, you’ll be given access to a recording. Based on past webinars, it would be a worthwhile event.
Here’s the link to register: rightmindtrader.com webinar