| | | Sleekoptions.com - Trading Process
Trading Process is important for to help you manage risk in a disciplined way. A Trading Process is nothing but a set of rules which you can consistently apply over a period of time for all your trades. Trading Process helps you to stay disciplined and also something that you can repeat and measure. Creating a trading process is very simple. But staying disciplined and following the rules laid out in the process is the tough part. Need some patience and belief in the process you created. A 'Trading Process' is nothing but a set of rules which you can apply mechanically. You can also create multiple trading process and apply them parallely, but when you do that please be dilligent to not mix up the funds allocated for one process to another.
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Trading System Name:
Here are the steps to create your basic trading process. May take some time, but it is a must to create your process and document them before trading.:
| Step 1 | Do the following before you begin to create your trading process. | | S.No | Task ( Complete them all) | | 1 | Review the FAQ, at least twice in its entirety | | 2 | Pick a few symbols and review the past performance of expired alerts. Analyze the data. For example, look for:
1.How often are the alerts triggered?
2.How many are loosers?
3.How did the alerts perform after dipping 40% and 70% after they are posted?
4.What are the avg win/loss ratio?
5. Are Swing Alerts better than Scalp for the symbol?
6.How did straddles perform for the alerts that failed?
7.How many times have they expired to zero without being in positive?
Analyzing this will help you formulate your trading process and you will also get a good understanding of how you can use these alerts.
| | 3 | Think about all your rules that will help you narrow your focus. | | 4 | Proceed to Step 2. |
| Step 3 | Money Management Rules ( Pick either 'Batch Method' or 'Profit Cycle Method' (or) Create your own method ) | | These are some simple rules. Within a process, you can have different set of rules for capital account trades and profit account trades. | | S.No | Method Name | Questions for this Rule | | 1 | Batch Method | | In a Batch Method, you define the number of trades per Batch and at the end of each batch, you close the batch and start a new batch. You measure the performance of the trades for the batch as a whole and not for individual trades. For example if you batch size is 15 trades, you dont have to open all the 15 positions the same day. You still enter new trades only if all your other rules are satisified and checked. | | S.No | Questions you need to answer for the Batch Method | | 1 | How many trades in a batch?
Primary Lot + All Secondary Lots combined is counted as one trade. | | 2 | What is the max total investement per trade in this batch?
Recommended is not more than 3% to 5% of the account balance for each trade. For smaller accounts, not more than $100 per trade. | | 3 | Are you going to trade in multiple lots? (Primary + Secondary Lots). If Yes, which Entry Method are you going to follow? Please note that, if you are following a multi-lot buying strategy, all lots combined counts as one trade. | | 4 | How much percentage of the profit are you going to reward yourselves at the end of the batch? | | 5 | Maximum number of open positions at any given time for this batch? | | 6 | How many new trades a day for this batch? | | 7 | Does all the trades in this batch follow the same rules? (Recommended to follow the same rules) |
| | 2 | Profit Cycle Method | | Profit Cycle Method uses defined compounding approach to grow the account. In this method, we seperate the account logically into two parts. Capital Account and Profit Account. When you start the profit cycle, Capital Account will have all the balance and Profit Account will start with a zero balance. As and when we close trades, we move the profits to profit account. When the balance in profit account reaches a certain level, we execute two or three consecutive trades from profit account. After two or three consecutive trades from profit account, we close the current round of profit cycle and start a new round. And the cycle repeats. | | S.No | Questions you need to answer for Profit Cycle Method | | 1 | What percentage of your capital account balance are you going to invest in each trade from capital account? | | 2 | Are you going to trade in multiple lots? (Primary + Secondary Lots). If Yes, which Entry Process are you going to follow? | | 3 | What percentage of the profit are you going to move to profit account? | | 4 | What should be balance of the profit account to execute your first trade from profit account? | | 5 | How many consecutive rounds of trades are you going to place from Profit Account? | | 6 | What percentage of the profit account balance are you going to invest in each trade? | | 7 | Does your profit account trades follow the same rules that you applied for capital account trades? | | 8 | What percentage of the profit are you goint to withdraw at the end of the profit cycle? |
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Enter your Money Management Rules for this Trading Process:
Provide as much details as possible. Be specific.
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| Step 4 | Entry Method ( Pick any one ) | | S.No | Entry Method Name | Primary Lot
1st Lot | Adjustment Lot
2nd Lot | Adjustment Lot
3rd Lot | Lot Ratio in Dollar Value | | 1 | Simple CALL only | Only CALLS from Primary Alert | | | 1:0:0 | | 2 | Simple PUT only | Only PUTS from Primary Alert | | | 1:0:0 | | 3 | Primary+40 | Primary Alert | 40% Dip Alert | | 1:3:0 | | 4 | Primary+40+70 | Primary Alert | 40% Dip | 70% Dip | 1:1:3 | | 5 | Primary+40 Change Direction | Primary Alert | 40% Dip, go Opposite Direction | | 1:2:0 | | 6 | Dip 40 + 70 | 40% Dip | 70% Dip | | 1:2:0 | | 7 | Dip 40 + More 70 | 40% Dip | 70% Dip | | 1:3:0 | | 8 | Dip 70 Only | 70% Dip | | | 1:0:0 | | 9 | Primary + Dip 70 More | Primary Alert | 70% Dip | | 1:3:0 | | 10 | Primary + Dip 70 Change Direction | Primary Alert | At 70% Dip, go opposite Direction | | 1:2:0 | | 11 | Dip 70 + More Dip | 70% Dip | 40% dip on 1st Lot | | 1:3:0 | | 12 | Straddles | Both CALL and PUT.
Aprox for same dollar value | | | 1:0:0 |
Which Entry Method are you going to follow for this trading process?
Pick one to keep your trading process simple.
You can pick one from the above list or you can formulate one on your own.
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| Step 5 | Exit Rules (Pick any one) | | These are some simple rules. You can create your own rules based on the sample rules below. Pick 1 or 2 Rules for each process. Alternatively, you can pick different rules for capital account and profit account trades. | | S.No | Exit Method Name | Exit Rules | | 1 | Conservative - Stop Loss | Exit when loss is more than 30% | | 2 | Conservative-A | Exit when profit is more than 30% | | 3 | Conservative-B | Exit when profit is more than 30% and Price is below yesterdays low for CALLS.
Exit when profit is more than 30% and price is above yesterday's high for PUTS. | | 4 | Conservative-C | Exit when Price is below yesterday's low for CALLS.
Exit when Price is above yesterday's high for PUTS. | | 5 | Conservative-D | Exit when today's high is above yesterday's high and current price below yesterday's close for CALLS and opposite for PUTS. | | 6 | Middle Ground-A | Exit when Daily candle is higher high for 3 or 4 days in a row for CALLS. Opposite for PUTS. | | 7 | Middle Ground-B | Pick your resistance and support lines and Exit when price touches resistance for CALLS.
Exit when Price touches Support for PUTS. | | 8 | Aggressive-A | Exit when RSI(9) on daily is above 70 for CALLS and below 30 for PUTS. | | 9 | Aggressive-B | Exit when RSI(9) on daily is above 70 and price is below yesterdays close for CALLS
and exit when RSI(9) daily is below 30 and price is above yesterday's high for PUTS. | | 10 | Aggressive-C | Exit when RSI(9) on daily is above 70 and price is below yesterdays low for calls and
below 30 and above yesterday's high for calls. | | 11 | Your Own | Formulate your own exit rules. You can have different set of rules for trades from capital account and profit account.
Apply the same set of rules for all the trades within the process. |
What are your exit rules for this trading process?
You can pick from the above list and/or add your own. Keep it simple and easy to follow and repeat.
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| Step 6 | Process Rules | | S.No | Rules | | 1 | It is important to measure the performance of your trading process so that you can do minor tweaks at the end of it. So either setup excel sheets or journals in sleekoptions.com to log all your trades. | | 2 | Ensure that the same rules are followed for all the trades. Only then, you can measure the performance of your trading process accurately. Within a Process, if different rules where applied for trades, then your performance measurement of the trading process is not accurate and you will not have a repeatable process for the next round. | | 3 | Paper Trade your process for a few rounds and see how it performs before risking real money. While paper trading, do all the steps as if it was real money, log all your trades and measure the performance of your process. |
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