Finding the balance between a trading system that is totally mechanical (and hence sometimes counter-intuitive) and a system that allows an element of discretion (and hence introduces emotion into trading), is a tough balance to find.
However as a trader it is important to understand your own strengths and weaknesses, in order to find a way of trading that is both profitable and suits your personality. As I continue my trading journey I am aware that my systems are becoming more discretionary and hence emotion has returned to my trading, where as previously I had managed to remove it (by simply following a very mechanical approach). I now have problems ‘pulling the trigger‘ and so in order to deal with this I have decided to run a strategy that is based purely on technical analysis.
I will base this simple technical strategy around my favourite indicator – The Squeeze
Here’s how I intend on selecting those trades, together with the money management parameters I will use in order to limit the downside pain.
‘The SQUEEZE’ Trading plan
1. Using Price Action decide if market is Bullish or Bearish. Primarily only trade with the prevailing trend
2. Scan FTSE100 & FTSE250 for Stocks where the squeeze has fired in the last day.
3. Place a maximum of 4 trades per day with a maximum risk of 0.5% per trade and a Reward/Risk ratio of at least 2:1
4. Trades can be limit, stop or market orders.
5. No looking at the trades during the day.
6. I can have a maximum of 6 trades on at any one time (3% BE@R)
Trades Placed tonight
Royal Dutch Shell Plc -A- (Buy limit@1846 – 150 shares. Stop 1816, Target 1924. Max Loss £45, Max win£117)
Sage Group Plc (Buy Limit@234 – 600 shares. Stop 226, Target 246. Max loss £48, Max win£72)
Whitbread Plc (Buy Limit@1311 – 100 Shares. Stop 1255, Target 1421. Max loss £56, Max win £110)
Xstrata Plc – (Buy Limit@958 – 50 Shares. Stop 868, Target 1188. Max Loss £45, Max win £115)
