- Adaptable- a strategy must be able to adapt to a changing market. It must also be able to adapt to your internal changes. If nothing changes there would be limited chances for profit. Every trader must root for changes but it does not matter if you cannot adapt.
- Definable- there are times when you need to override your strategy but that happens for less frequently than we think. A majority of your trades you should have a definite reason for a action.
- Quickly explainable– if you can’t explain your strategy or reason for a trade in a minute or less it is probably too complicated. Until you fully understand your strategy a majority of your “indicators” are just putting a band-aid over a gaping wound that is your lack of understanding.
- Personal- You are an input into the way you execute. You cannot be something you are not. Do not get me wrong there are things about yourself that you need to bend to trading but strategy should not be that one. It is hard to fake being tall and expensive to be a type of trader you are not.
I am not saying a trading plan will make you a successful trader, there are other factors. It is a necessary first step. You need a trading plan to consistently and confidently execute. Your trading rules should answer whatever questions the market asks you. Originally I made the mistake of planning out my trades, for example. If the market does x I am going to do y. Well when I was creating that plan that was what was working. When I started to apply that plan the market had changed. That is why many probably scrap their plans or do not work on them in the first place.
You are either a system trader or a discretionary trader. Each has it’s own equity curve and set of responsibilities. Below are some videos that you will find helpful.