Ground work in the planning stage

The planning stage is where you want to spend as much time and energy in exploring and trying out as many trade setups as possible. This is the stage where you must use your time to the fullest in studying various platforms, markets, instruments, time frames, tools, analysis etc. 

As a novice and prospective trader, your aim in this stage is to come up with one trading idea that will potentially take you to the long term business goal of your trading life cycle.

So two things become extremely important in your studies and explorations. 

1. One trading idea and
2. Long term business goal

You can choose whether you want to be your own analyst and make an attempt to find your own trading idea, or whether you want to follow someone else who already seems to have that one trading idea.

If you want to do your own analysis and attempt to find that one good trading idea for yourself, here are some places that you may want to start out with

Books :

• The new trading for a living - Alexander Elder
• Trading in the zone - Mark Douglas
• Five waves to financial freedom - Ramki Ramakrishnan
• Come into my trading room - Alexander Elder

Online sources :

• Chartschool
• Investopedia

These are just to name a few to get you started with. You will find more such resources if you search for them.

However, if you want to follow someone else, you may find one of the few given below as a useful hint to start with.

• Just Nifty - A daily blog dedicated to Elliot wave study on Nifty and a few stocks
• Nifty Trader - A site that provides handful of tools that point towards a variety of trades.
• ITrade4Profit - A subscription based site giving positional tips on equity
• Nifty Range - Auto updated site developed by me, suggesting daily ranges of Nifty
• Futures Range - Auto updated site by me, pointing out trades in Nifty Futures. Also check out the Online Trading Diary, where daily trades along with their timings and actions taken are published every day.
• Options Range - Auto updated site by me, suggesting trades in Nifty Options

I am sure, you will find many more such resources which you can choose to explore.

Before exploring all this, you need to define your long term business goal, so that all your activities from hereon are aligned to this goal. Here are just a few examples.

• I want to earn 1 Lac per month 12 months from now
• I want to make a profit of 2 Lac per quarter 9 months from now
• I want to buy a new house from my profits within 2 years from now
• I want to be out of debt by the end of next year

Having done that, you need to start finding that one trade idea that would take you towards this goal, step by step.

Once, you choose a study, validate its results on these parameters 

• How frequently do the trade setups appear?
• Is the minimum capital requirement of these trades affordable to you?
• What is the probability of success in these trades?
• How much of profit per trade can be reasonably expected?
• Is the profit per trade at levels which are acceptable to your long term goal?
• Is the max loss per trade reasonable and acceptable?
• Is backtesting possible? If so, how do those results measure up?
• How long will it take for you to achieve 10 or 20 such trades successfully in a row?

You will need to repeat this cycle of exploring, testing and validating until you are sure you have found out the one trading idea that satisfies all your needs and that will eventually lead up to your long term goal.

Before you finalize on any one trading idea, here are some tips that might help

• If the initial capital requirement of any trading idea is too big, then it will be a limiting factor in exponential growth at a later stage
• If the logical risk factor of any method is too large, then it can become a hurdle that might set you back at a later stage
• If the profit expectancy from any method is too small, then it may not be able to help you achieve your long term business goal in the stipulated time.
• If the frequency of the trade set up appearing on the screen is too low, then it would take you that much longer for achieving your long term business goal.

Also remember that in the planning stage, there will be temptations to try out these ideas on the real trading terminal with real money. But avoid all these temptations. It is like a child who has got its first tricycle wanting to ride on the busy highway. Avoid it at all costs. Concentrate on the study and validations. Real trading is just round the corner. Keep telling this to yourself.

Happy Trading !!!