Road Map

"Preparation meets opportunity"

You probably have already read this somewhere in the trading community. Or heard it, perhaps.

By a lot.

But I wonder...

What does the line really mean?

One byproduct of me writing a journal for the past 3 months is developing the habit of writing my trade scenarios or ideas during my trade reviews by the end of the day.

Normally I'd journal just the stock's movement during or after market. But as I progress, I added more details on it. I'd write my scenarios. My if-then-else.

By doing this, I am mapping out my trades for the next day. And this additional small details on my journal made a big difference on my trading routine.

By writing my road map for the next day/week, I am basically rehearsing and visualizing my trade scenarios in my head before the market opens.

It is like a basketball team practicing their different plays against their opponent for their next game. And even before the actual game starts, the team performs their warm up.

Even the war generals had to come up with different battle scenarios to make sure they come out of battles victorious, if not, at least alive. They scout for strategic locations. They look for vantage points. They forecast the weather. They map the terrains. They use every bit of information to come up with a sound battle plan. And then they run it over and over their heads and to their armies. So that when the day of the battle comes, they're ready to conquer. Just as a trader run his trade ideas and warms up before the open, the trader is preparing his mind to execute his plans in real time and telling himself on where to put his efforts and focus the most.

Here's a simple Road Map of my trade on one particular stock. I am not saying the trade is perfect. But at least it turned out as planned.

Let's look at this chart...

Daily Chart - Feb 01, 2019

I entered the trade during a DB and boss breakout. Then the move was followed by another continuation candle until it did a pause day. That's when I laid my trade scenarios for the stock. Allowing for several ideas to be considered.

1. If price goes down scenario - 20MA is still too far from current price, then consider potential new DB support as trail stop.
2. If price consolidates - a new DB is formed, then just HODL; if DB support is broken and 20MA is still far, then sell at break of support.
3. If price rallies but ATH acted as resistance  - watch out for signs of weakness at ATH resistance, then sell if no new DB is formed and price gets weak.
4. If price rallies and breaks out of ATH - then trend follow and move trails stop to previous ATH line.

Also, notice that in each scenario, not only I am preparing for when the stock goes my way but also for when the stock goes against my bias. I am establishing conditions that will invalidate my trade ideas.

For this case study, Trade Idea No.4 materialized. It broke out of its ATH and just kept on going.

Daily Chart - Apr 5, 2019

"Preparation meets opportunity"

You probably have read this somewhere in the trading community. Heard it, maybe. By a lot.

But I wonder - what does the line really mean?

There can be many ways to prepare yourself for opportunities. Maybe one way you can better prepare for the opportunity is just taking some time to write your trade ideas before each open or the night before so that you'll be ready on whatever the market throws at you during market hours.

Writing trade ideas is just one of a trader's basic tools. But most new traders fail to practice this habit or some completely ignore it. Practice this small habit and maybe it will also help you prepare to perform better.

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I'll leave you here with my basic road map of how I evaluate my breakout entries.