Monday, August 23, 2010

What's the Game Plan?

Over time traders are exposed to varying trading styles and strategies. While one could attempt to utilize every technique, most settle into a consistent routine with a few favorites. Though there are a variety of factors that ultimately influence which trading style trader's adopt, identifying one's niche boils down to personal preference, risk tolerance, and what I would call the success factor. I suspect most traders, like me, gravitate towards those strategies which consistently deliver. In other words, we use the strategies that have proved the most fruitful in the past. If it's a trading technique that fails to deliver after multiple attempts, I'm not afraid to toss it in the thanks but no thanks bucket and move on. While I'm always on the look-out for new ideas, I'm not on a quest to clutter my toolbox with unworthy, fruitless strategies.

I'm continually tinkering with better ways of organizing my play book. One preferred approach is to break it down into trade setups and strategies of choice. The graphic below displays my current method of choice for arranging my bear toolbox. I've not only identified the trading patterns of choice, but also the strategies used to exploit these trading opportunities.

The end goal and ultimate litmus test for any market participant is consistent profitability. Reason will tell you consistent results necessitate a more systematic, structured approach. If you're lacking structure, consider today's post just one idea of how to begin the process.

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