A Day in the Life of a Successful Trader – System, Strategy and Plan
By Jody Samuels
This article in The Trader’s Pendulum Series reviews a successful trader’s system, strategy and plan to move you from hobby to business in your trading. In the last article we discussed the importance for a trader to develop a trading system as part of the ‘A Day in the Life of a Successful Trader’ series. Your mission in developing these habits is to get out of the Technical Trader’s Trap and transform into an Entrepreneurial Trader. By now you have completed the Scorecard (www.fxtradersedge.com/scorecard) and are ready to get down to business.
The Difference between a Trading System, Strategy and Plan
A trading system is a collection of trading strategies. A trading strategy is simply a methodology that determines how a trader enters and exits trades based on price action, analysis techniques, a chart setup with indicators, or a combination of all. To deal with various market cycles, a trader often defines a number of different trading strategies. These strategies together make up the trader’s trading system.
A trade plan is a set of rules formulated for an individual trade when a trade opportunity arises. It dictates the trade management actions a trader plans to take for that particular trade, including where to enter the trade, where to take profit, and where to take the loss. Each trade plan is unique to a trade. Actual price levels are used when defining these actions.
To further illustrate, let’s look at what a trading system and a trade plan each consists of.
A trading system defines what you want to trade, how you want to trade, and what your specific trading strategies are within the system. It comprises of the following elements:
- The markets you want to trade in
- The time frame you want to trade, e.g. 5-minutes, 15-minutes, 1-hour, 4-hours, 1-day, etc.
- The chart setup, including analysis trading tools such as Elliott Waves, Fibonacci, Pivot Points and Indicators to help identify and confirm trading opportunities
- The position size based on money management rules
- The specific entry rules
- The specific stop loss procedures and risk taken
- The specific exit rules
On the other hand, a typical trade plan defines the following for a particular trade:
- Entry prices for the trade
- Profit taking exit prices for the trade
- Stop-loss level for the trade
- Trade management rules for the trade (trailing profits or stops for example)
Notice that a trade plan is brief and can usually be outlined in a few lines.
If you’re interested in adopting these habits and working through the business planning template for Habits 1 – 10 discussed in this article series, the book is a detailed blueprint for you to follow and make your own. The book is also supplemented by a companion website with downloadable tools.
If your mission is to become a trader or investor who stays out of the Technical Trader’s Trap, then take the leap to grow into an entrepreneurial trader.
I created the FX Trader’s EDGE Coaching Program modelled after the “10 Habits of Successful Traders”, which is the title of my newly published book by Wiley.
Excerpted with permission of the publisher John Wiley & Sons, Inc. from The Trader’s Pendulum: The 10 Habits of Highly Successful Traders. Copyright (c) 2015 by Jody Samuels. This book and ebook is available at all bookstores, online booksellers, and from the Wiley web site at www.wiley.com.