This Is One Of The Most Powerful Things You Can Do

December 23, 2003
Chris Curran

The
March SP 500 futures opened the holiday-shortened week with a small
downside gap after the nation’s terror alert was raised a notch over the
weekend. After an opening surge to test Friday’s high at 1,090, the contract
ran out of steam and slid back to the flat line, where it churned for the next 3
hours. The recent pattern of a late move up panned out again as the contract
was able to break last week’s high.

The March SP 500 futures closed
Monday’s session with a gain of +7.25 points, and finished in the top 1/2 of its
daily range. Volume in the ES was estimated at a holiday-lightened 292,000
contracts, which was behind Friday’s pace and well below the daily average.
Looking at the daily chart, the contract posted a bullish engulfing line and is
trying to establish a new, higher trading range. Its 10-day MA support is
following in the 1,074.50 area. On an intraday basis, the 60-min, 30-min, and
13-min charts all broke cup and handle/ascending triangle patterns, with the
1,090 breakout level now acting as support.

Tuesday
morning gives us the Final GDP number for Q3 at 8:30 am ET, with estimates
looking for growth of 8.2%. That is followed at 9:45 by the final December
Michigan Sentiment number, which is expected to increase to 91.0.

Do You Have a Plan?

Do you
have a plan? A serious, genuine business plan?

Imagine
you have an uncle willing to grubstake you $200k if you can provide him a solid
outline of your methodology and why that methodology will be profitable. He’s
skeptical but willing to read what you’ve written down. Would you be able to
convince him with what you’ve got now?

Even if you are totally discretionary, you should be able to articulate and
justify, in clear words on paper, the reasoning behind every action you
take. Discretionary traders are ultimately systematic too. They just
trade conceptual patterns instead of mechanical ones.

When do you
enter and why? When do you add? When do you exit and why? What is your
planned risk per trade? What is your typical R:R target per trade? What is your
survivability quotient (how many losses in a row would it take to kill you)?
How feasible is your planned risk in regards to matching up with real world
volatility risk. Are your range captures realistic or too close to random? Are
you using viable software or trying to get by with a cheap piece of crap? And so
on and so on.

Intuition and gut feel are great tools for old hands who have been trading for
years. New traders need all the rigidity and concrete support structure they can
get. If you don’t have a reason in writing for what you are doing, don’t do it.
Real time journalization, which means putting down your thoughts as they occur
and seeing your rules and experience evolve together, is one of the most
powerful things you can do. But you have to be willing to see it through for
months or years before you get anywhere.