How to create an objective trading plan

Today I'd like everyone to welcome back Dr. Barry Burns. He was a guest blogger a few weeks back and the overwhelming response was "we want him back"! So you asked for him, I called in a personal favor, and here he is again to help teach us.

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Traders who use technical analysis rely on charts to help establish a probability scenario for entering a trade.

We generally look at 3 things:

Price patterns.
Volume patterns.
Indicator patterns.

There have been countless books written and courses sold on how to use these things to predict future market movement. Despite this, countless traders continue to fail in their attempts to become profitable.

Why?

After years of watching my father trade (he had 70 years of experience in the markets) and many years of my own experience, I’ve come to this conclusion:

None of it works!

That’s right. I haven’t found a single price pattern or indicator that could accurately predict the future of the market with enough probability to make any money.

So, is technical analysis an exercise in futility?

Although I haven’t found any one single thing to prove profitable, favorable probability scenarios can be found by combining several indicators. However this has to be done in the right way.

I identify what I call the “energies” of the market, and have selected certain indicators to measure those energies.

5 of the energies are:

Trend.
Momentum.
Cycles.
Fractals.
Blockages.

The key to success is to wait until all 5 of these energies align telling you the same thing (“go long” or “go short”) at the same time.

Indicators measure these energies. Again, I don’t have much confidence in any single indicator. After all, they only do what their name says: They “indicate;” they don’t “tell” you what the market will do next.

However, when all 5 indicators align, and they each measure a different energy, then this is a time when the probability is now on your side.

You can even use this to “score” a trade on a scale of 1-5 depending on how many “energies” (indicators) align in the same direction.

You may choose to be very conservative and only take trades that are very high probability – so you’ll wait until all 5 energies align. The downside of this is that it doesn’t occur very often and therefore you won’t be very active in your trading.

You may decide you need more trades to be psychologically satisfied and keep your interest and focus on the market. In this case you could take trades that rate a 4 (4 of 5 energies align in the same direction at the same time). You will get more trades, but your
win/loss ratio will be slightly lower.

You can choose your favorite indicators to measure these 5 indicators. Which ones you use isn’t the most critical factor … as long as you know how to use them properly.

Using this approach gives you a very measurable and objective way to make decisions and track your trades.

BIO:
Dr. Barry Burns is the owner of Top Dog Trading which teaches people how to avoid the long learning curve in day trading, swing trading and investing.
He started his study of the markets under the direction of his father, Patrick F. Burns, who became independently wealthy through trading and had over 70 years of trading experience before passing away in 2005.
He has been the featured speaker at DayTradersUSA, and developed a 5 Day Course for WorldWideTrders.
Dr. Burns has been a headlining guest speaker for the Market Analysts of Southern California, given seminars around the country at many Wealth Expos as well as many Traders Expos, been interviewed on the Robin Dayne "Elite Masters of Trading" Radio Show, and is the former moderator of the FuturesTalk chat room.
He has a doctorate in Hypnotherapy and is a certified NLP practitioner, and therefore able to help people with the psychology of trading.

9 thoughts on “How to create an objective trading plan

  1. Without specifics this posting is not very useful. Using terms like "energies" confuses. Trend.
    Momentum.
    Cycles.
    Fractals.
    Blockages.
    It shouldn't be asking too much for an example of an indicator for each of the 5 items. Most of us have chart services which supply indicators. So something specific would be useful.

  2. very good strategy,where can i get cycle and blokage.what of intermarket analysis indicator,please give me one if you have to sell,thanks

  3. Well.... i have perused all comments vividly and i believe everyone that has posted messages on this blog is by no means far from the truth , However it is paramount to note that various indicators give different accertions as to the movement of the market ...but i must stress that the most affirmative of all is the trend of the market either in a short term or a long term basis.All other indicators both in a short or long term basis will sooner or later concur with the trand of the market ....pls dont get me wrong the charts,most especially candle sticks are perfect indicators , if indeed you know how to implment them and get them inculcated in the trend of the market also fractals ,blockages and cycles,moving averages e.t.c are perfect to only those who could see and reason beyond their horizon to accertain the next direction of the market(Utmost Significance)
    On the contrary however it is very important that one MASTERS one , two or at most three
    of this key technical indicators to arrive at the conclusions and to alley any fears of the market rbounding after all the necessary risk assesment analysis have been made ....THATS THE ART OF SELF MASTERY ..DO SEARCH YOUR SELF AND BRING OUT THE GOLD IN YOU ....regards

  4. Let me make it extremely simple for everyone. I am the best indicator! If you use my trades, you do exactly the opposite & you will do very well!
    Enjoy your trading.
    Joe

  5. i'm taking it all in and learning all the time .

    thank you for your artical and your time to present it .

    yours TERRENCE LANE

  6. IF THE MARKETS WERE CERTAIN THERE WOULD BE NO MARKETS. THE ANCHOR TO TRADING SUCCESS IS OUR CHOSEN TRADING PLAN. NOW YOU HAVE AN OPPORTUNITY TO STRUCTURE YOUR TRADING PLAN AROUND THE MOST POWERFUL INFORMATION. DOCUMENT EVERY SINGLE TRADE YOU PLACE. MANAGE YOUR TRADES.

  7. Thank you for giving us the 5 "energies" of the market. Could you now identify a preferred indicator for each of these energies? The first three are reasonably easy to find good indicators for, but the last two are trickier - that is where your advice can be very valuable.

    Thank you for giving us some new ideas.

  8. O.K., but how about concrete examples of how to measure each of these 5 "energies", or at least a reference to where one might find details? Such vague and non-specific advice as this article contains is really quite useless.

  9. Hi--I amvery interested in this .Can I know how to I approach the followings?

    -- Cycles.
    -- Fractals.
    -- Blockages.

    Itwill be good if u can show an example.

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