Today, I plan to share the investment insights Benjamin Graham, Warren Buffet’s mentor, gleane...
Join Adrian Manz LIVE at TradersEXPO Chicago!
Join Adrian Manz LIVE at TradersEXPO Chicago!
Why Planning Your Trades is Critical
12/29/2012 6:00 am EST
Adrian Manz explains why planning every trade you take is important to your long-term success in the trading business.
As a trader, you’ve probably heard you should have a trading plan, but planning is a very important part of being successful as a trader. My guest today is Adrian Manz to talk about that, so Adrian, I know you’re a big planner in your trade. Why do you think it’s so important?
Well, I think once you introduce discretion into the trading day, you also introduce your psychological variable, how you’re feeling that particular day about your financial situation or how much money you’d like to make, or there’s a lot about your relationship with money that’ll determine what you’ll do on the fly during the day, where you’ll see opportunities, and what I’ve always found is that especially if somebody hasn’t made money for the last two or three days, or maybe has lost money, the people I talk to, they’ll say well, I didn’t really have a plan, but I was looking for a good reason to get in, and the good reason to get in always ignores a lot of things that happen in previous sessions.
So when I’m setting a trading plan, I’m considering things like okay, what was the volume weighted average price of each of the big moves that happened over the course of a day? How much evidence is there of institutional activity going on in those moves? Is there evidence that it was a lot of individual traders, a lot of 100- and 200-share blocks going off? Is there natural support and resistance nearby? Are there pivot inflections nearby and was there news that drove the stock the previous session?
Well, if I have to think about all that while I’m looking for an opportunity in today, it’s just not going to happen. All right, I’m going to see something that’s there and I don’t have time to back and drill down and figure out if their 15 variables had anything to do with the move, I’m just very likely to just take the trade and at the first sign of trouble I’m either going to bail out of it, or I’m going to stick with it too long, I just—I never advocate trading that way.
All right, so you advocate doing your homework at nighttime and be ready with a list of stocks that you are going to trade that next day?
Right. I think if you can’t walk away and let your kid handle the trades because it’s all written down and—not my four-year-old, but if—you know what I mean. It’s on the desk in front of us when we walk in, in the morning, and we know exactly what we’re going to do, we know why we’re going to do it, we’re going to know exactly what we’re going to do if things go right, we’re going to know exactly what to do if things go wrong, and especially in our case, we’re a husband and wife trading team, this way there’s no sneering, there’s no arguing, there’s no why did you do that; we know it ahead of time.
Do you look at your trades after the fact; do you spend as much time looking at trades you’ve done as reviews to see if they worked as you do preparing for them?
Yeah, so we put everything into—there’s like this giant Excel spreadsheet that goes back to 2005, chronicles everything month by month, trade by trade, has a bunch of analytics built into it. We just import that directly from—I use RealTick, so we just output everything through an Excel DD or whatever the protocol is, and it loads it all onto the spreadsheet for us and then at the end of the day we’ll take a look at what happened. At the end of the week, we’ll really take a look at what happened, take a look at the breakdown. I want to see am I biased towards a particular pattern, am I looking for expansions when I should be looking for consolidations because I like trading expansions, how many trades were on the long side, how many trades were on the short side, am I fighting the market, am I cooperating with the market, what was my ratio of winners to losers, so we look at all this stuff and just constantly try to keep a grip on whether we’re maintaining the discipline or if we’re letting emotion get the better of us.
Related Articles on STRATEGIES
I spend a lot of time talking about block trades. These are the huge trades that show up on your opt...
I have been tracking a set-up for the SPDR Gold Trust ETF (GLD), which I analyze as a proxy for the ...
AllianzGI Equity & Convertible Income Fund (NIE), which yields 6.8%, invests in convertible equi...