JB Trader walks you through her thought process as she plans out a trade. Assessing your risk beforehand is the #1 most important aspect of your Trade Plan that determines if you enter a trade or not.
Good. What is this? Morning, yep, still morning. So, just working with my partner to put on some options on crude oil futures price. Is it a good area of what’s the term? I guess people know it as support.
You just got to quickly navigate through your platform, do some research, look at your numbers you pretty much when you have a trading plan. You already have an idea of what trades you typically take, what falls within your parameters. So, you don’t have to think from scratch.
And I shouldn’t take you too long to put on a trade when you see the price coming into an area that you have your eye on to either buy or sell. So, that’s why a pre-planned trade plan is very important.
You actually can’t trade without one, now you can modify it along the way after taking so many trades, then you have a good pool of data with which to draw a conclusion with what works, what doesn’t work. But you want to consistently trade a certain way according to your trade plan for 1 month.
Thirty tradespeople says: “Typically, 30 to 50 trades log them, journal them, document them”. Then you can see where you’re at and how you’re doing and if you need to make adjustments to your trade plan, that’s when you do it. Let me go ahead and kind of calculate my risk in this trade you always want to do that.
Risk management number 1, number 1 rule in trading: You don’t want to lose your shirt or your slippers whatever your trade-in. What’s today? Today is the, what is today seriously? The trough, okay so, by next Friday, say price gets to whatever. Willing to lose a certain amount, the price gets to there and I’m just looking to where I want to put my stop.
You want to have your entry, your stop, your target. Target 1, 2, 3, whatever or even multiple entries if you want to scale in so everyone’s, you know strategies a little different, but as long as the numbers make sense and you have calculated risk. Okay, we all hate to be stopped out, especially when we feel like: “It’s gonna stop me out and then work your little trickster”. But that’s just a part of it, you just have to get over it and it can take a while to get over it.
It took a while for me to get over and it makes you kind of take on more risk you want to put your stop further away. Some people just stop using stops altogether, but in order to run a business and have a conservative model to last more than 6 months and not blow out your account, you have to cut your losses. And your losses have to be very small compared to your average gain.
That’s how you can lose several trades and still be profitable. Just a matter of probability. All right, let’s see if the price got there at the end of this week. This cool part with options gives you some wiggle room, I don’t want to go there this week that sucks. I don’t make me lose a lot more.
All right, hypothetically what I’m willing to gain. I’m stingy. I don’t like to give back much. That is not cool. You’re almost there. What are we doing?
I have to confer with my partner, I’ll keep you posted. It’s a good trade, though we just have to agree on how much money we’re willing to spend potentially on this trade. Gotta do it, gotta communicate. It’s different when I go out and shop and I spend money, and I don’t tell my husband, he doesn’t really like it.
That’s our thing, maybe you guys don’t run into that problem. But I don’t know if I lose money on a trade, he doesn’t care, I just want me to trade. So that’s cool. Bye.