Let's start with the Rules ...........

To be a successful trader you must remove emotions, as much as possible, from the trading process. You do this by developing very clear and specific trading rules, backtest them to ensure they are profitable and then systematically execute them.

Rule #1 - What Markets to Trade

The first step is to build a diversified portfolio of approximately 30 markets that you will trade. By trading diversified, uncorrelated markets it will help smooth out your equity curve by targeting your trades within the strongest trending markets. To get started it is recommended that you build your market portfolio using Exchange Traded Funds (ETF's) within the 4 main financial markets including:

  • Equities
  • Bonds
  • Commodities
  • Currencies

Rule #2 - How to Identify Trending Markets

Once you have built your market portfolio you will need to identify and trade the strongest markets in your market portfolio. This goes against the conventional investing advice of buy low, sell high.  When trend following trading, you want to buy high and sell higher.  The majority of trend following traders will buy on a breakout from some defined level.  This defined level could be a channel breakout, a 52-week high, a new all-time high, or some other level that allows you to catch the momentum of the trend. 

Rule #3 - How to Enter the Trade

To be a successful systematic trader you must have a clear trigger that allows you to enter the trade without second guessing the decision. In this module you will define your entry trigger. If you are using a breakout system, the trigger could be close above the breakout level.  Each day you will review your watchlist to see if any markets meet your entry trigger criteria; and if they do, you place a buy stop order at or above the high of the close with presumption that the trend will continue on the next trading day. Your buy stop would be hit, and you would be in the trade.

Rule #4 - How to Exit the Trade if you are Wrong

You need to accept the reality that with trend following trading you will be wrong more often than you are right.   Before you enter any trade, you need to define the price in which you will get out if the trade does not go as originally planned. In this module you will formulate your stop loss exit. There are many ways to determine your stop loss exit.  Like the rest of your trading system, it must be something you are comfortable with and clearly understand the logic behind it.  You can consider using a percentage stop loss (i.e., sell if stock price drops x% below purchase price) or a stop slightly below the breakout price, a specific moving average, or some multiple of the Average True Range (ATR).

Rule #5 - How to Protect your Capital

Money management is the most important component of your trading strategy. In defining this trading rule you will determine how much money you are willing to lose if you are wrong. Many studies have been undertaken that prove that you should not risk more than 2% of your portfolio on any one trade. In the previous trading rules you determined your entry price and stop loss exit. You can then apply your defined risk % per trade to calculate how many shares you can buy.

Rule #6 - How to Exit a Profitable Trade

Finally we will move onto the fun stuff. Your Trading Strategy has followed the successful traders mantra of"Cut you losses short and let your profits run."  As such a number of your positions have continued to follow the prevailing trend, and you are making money on these positions.  With a trend following trading strategy, you need to resist the urge to sell your profitable positions and let the trade continue so you can capture as much of the trend as possible. You should, however, have a trailing stop that follows your trade up and is always active; so that when the trend eventually ends, you will automatically be stopped out, so you can capture as much profit as possible.

Do these Rules really work?.....

The following data is from an actual backtest of a trading strategy developed using the Rules listed above and detailed in our Trading Workbook & Journal. The backtest traded approximately 30 diversified markets over a 10 year period and resulted in a 16.25% compound annual growth rate.

  • Backtest Info

    • Backtest Period: Jan 2014 to Dec 2024 (10 years)
    • $100,000 Initial Investment
    • Risk (R) per trade= 1% of capital
    • Channel Breakout Entry

    (Past Performance is not an indication of future results. Background, education, and experience all play factors. Your results will vary.)

  • Trading Results

    • Compound Annual Growth Rate = 16.25%
    • Maximum Drawdown = 17.34%
    • Total number of trades= 338
    • Winning trades= 145
    • Losing trades= 193
    • Win %= 42%
    • R multiple on winning trades= 2.97
    • Total profits =. $350,769

  • EXCELLENT

    "This is a great journal. It makes things so easy and disciplined. I only wish I would have had this journal 1000's of trades ago. However, I am happy to have it now. Thank you for a very high quality and well thoughtful journal. Great reference to my trades that worked and didn't work. Very nice. Thank you." - John M.

  • Outstanding tool to improve your trading habits

    "The typical trader is tempted by emotions to abandon their trading routine/rules. This journal helps you to identify your routine, and codify it as a part of your trading habits. I would highly recommend the journal for new and experienced traders alike." - Dan R.

  • Helps develop good trading habits

    "I have been using the journal for over a month now and it has definitely made me a more disciplined trader. I look forward to going through the process each day once the market has closed. I also like that I can use it as general planner to set and measure non trading related goals." - D.R.

  • Step 1: Develop your Trading Strategy

    The workbook will coach you through the development of a systematic trading strategy with very specific trading rules that define: 1)What markets to trade, 2) Potential trade setups, 3) How to enter the trade, 4) How much to risk on the trade, 5) Your stop loss exit, 6) Your profit stop exit.

  • Step 2: Backtest your Trading Strategy

    To be a successful trader you must remove emotions from your trading. Once you have developed your trading strategy the journal will help you backtest it to ensure it is profitable. The ability to trust your system and consistently execute it is key to your trading success.

  • Step 3: Execute your Trading Strategy Daily:

    There is a daily routine page that includes a detailed checklist of the steps you should go through to systematically execute your trading strategy. You will also set your daily goals and record your accomplishments. No need for a separate Daily Planner as this covers it all.

  • Step 4: Prepare your Weekly Trading Plan

    Every weekend you should take some time to review how the market performed during the previous week and prepare your trading plan for the coming week. You will identify your weekly goals, identify the strongest market sectors and review your watchlist so you are ready for the upcoming trading week.

  • Step 5: Review your Monthly Performance

    At the end of each month there is a monthly summary section where you will record your overall trading statistics and document individual trades. You will have a visual record of all your historical trades that you can review to see if there are any opportunities to improve your trading strategy.

  • Step 6: Enjoy the Rewards of a Profitable Trading Strategy!

    “You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody.” - Alexander Elder

Digital Trading Strategy Workbook and Journal

Get your Trading Strategy Workbook & Journal today for only $4.97!

We previously sold the printed version of the Journal for $39.00 but we are now offering the instant digital download for just $4.97! (Plus get a backtesting/ trading spreadsheet and mini-course for free)

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