Developing your Trading
Playbook
This is a note from the Developing your trading Playbook video by The Trading
Edge.
Where many traders go wrong…
They go for the “All in One” approach
They try to build a system that will let them seize every opportunity they see
Usually results in trying to trade a system that isnt well defined
Results in a confusing compilation of several systems, indicators and
strategies all mashed together
There is no defined starting point or end point
Trader spend time building this system that when things start to break
down - there is no easy way to troubleshoot the system which requires
laborous amount of effort and having the trader digging deeper hole.
If you please everyone, you please no one. We have to be specific
on the opportunity that we would like to capture.
Think like a business
Diversify your setups
Allows for better risk management (in times when your main setup has
reduced efficiency due to market sentiment)
When to adjust size based on the profitability of the setup
If one of the setup is giving high profitability, we should be increasing
our size of this setup.
Focus on small success, then build on it in an organized and methodical
fashion.
Track metrics - system and trader
Win loss %
Developing your Trading Playbook 1
AVG Win vs Loss
AVG RRR
AVG Return
Largest Drawdown
Losing Streak
Compliance Ratio
Am I, as a trader, can follow the system?
ETC
Understand where the breakdown occurs - is it the system or the
trader trading the system?
The Decision Making Process
1. Market Environment
a. What is the broader trend?
2. Trade Selection
a. Picking the setup from a playbook
3. Trade Management
In the game of dealing with uncertainty, the game isn’t about
being right - the game is about making the right decision based
on the information we have at the time.
Developing your Trading Playbook 2
Plays to Consider
Consolidation
Range Play
Uptrend Play/ Downtrend Play
Buying on a Pullback on strong Uptrend
Shorting into Strength on a Weak Stock
Support/Resistance Play
Sell at Resistance / Buyer at Support
Fresh News Intraday
Market Bounce
Opening Range
Breakouts / Breakdowns
Stock trades through Important Intraday Levels
Fill the Gap Play
Parabolic Moves
Developing your Trading Playbook 3
Successful Trading : Remove Uncertainty Develop your Plan
Risk Management
numerous setups can help us manage our risk
removes uncertainity from our plan
staying ahead of price action - certainty about what you are going to
do if a certain scenario unfolds.
We can’t control the market, we can only control our actions.
Having a broad expectation of the market participants. If we
have understanding on what the market participant expects on
the instrument that we are about to trade, then we can have a
plan on what to do incase that expectation fails.
If you are only trading the setups with no scenario planning, you
are thinking like the crowd. And like the fire in a theater, when the
Developing your Trading Playbook 4
crowd panics -everyone rushes in the exit at the same time.
Summary
1. Define your trading system
2. Diversify your systems
3. Focus on one system at a time and acccumulate the metrics
Metrics of the system
Check if the trader fits the system
4. Practice Perfect Execution
5. Get bigger in your A+ Systems
6. Think like a pro - Scenarios - Expectation/ Anticipation / Adaptation
Understanding expectation as a theory of mind of market participants
trading that instrument
Anticipate other scenarios that can unfold
How you can adapt - what are the setups in your playbook that you can
pick based on the scenario?
Developing your Trading Playbook 5
