Don's Trading Plan2.pdf

Don’s TRADING PLAN

Version 2.1

“So simple even a monkey can do it!”

Don’s TRADING PLAN

Version 2.1

“So simple even a monkey could do it”

Written by

donlbak@swbell.net

Edited and illustrated by

Freeman Gilmore

Version 2.0, 2.1 - October 2007

Rewritten, edited and additionally illustrated by

David B. Wyatt

http://nickajackcreektradingco.com

Prolog

This Trading Plan was originally compiled by Freeman Gilmore from 4 Trading Plans

written by Donald L Baker for the Paltalk chat room, tigerstraders. The original plans

were written in emails by the Texan Don Baker, tired and late at night. The first version

was packed with great information from the original emails. Don had done a lot of work

to put his thoughts down in writing and Freeman likewise did a lot of work to collate,

organize, and edit Don’s trading plan. His illustrations are a great edition to

understanding the trading concepts.

I originally started dissecting and rewriting some of the paragraphs so that I could

understand them. Many of the paragraphs were long streams of thought that were written

IN ALL CAPITAL LETTERS. I don’t know why, but I have a hard time reading pages

of paragraphs in all capital letters. In rewriting the paragraphs, I started to reorganize and

structure Don’s trading plan to make it a better reference for myself. I also read through

the more recent information written by Don and have added some of it to this Trading

Plan. I hope this new version can also benefit others.

David B Wyatt

October 16, 2007

http://nickajackcreektradingco.com

Introduction

My name is Donald L Baker, I have been a full-time trader since 1999 and a part-time

trader since 1992. I develop my own Trading Plan after trying many trading plans that did

not work for me. I have realized over the years that trading information vendors sell

trading system and information they themselves do not use or trade. I tell all traders is

use what works best for them, not what works best for me. As we all know there are

1000's of systems and trading plans. A lot are good; some use Murrey Math, Market

Profile, Fibs N, Piviot Numbers, all types of indicators and any other thing they can think

and try to sell. My Trading Plan is similar to that of Floor and Pit Traders. I will try to

explain it below.

New Traders; do not trade until you have a TRADING PLAN or system that you know

works over 70% of the time when followed correctly. You must know your trading plan

works and believe in it. You must not be afraid to trade your system. Go over your

trades each market day and compare them against your trading plan. Are you following

your trading plan? What can you do to improve tomorrow?

I believe in my trading plan because it works for me. I am not afraid to trade it. The

downside of my plan is that I must stay focused on my charts. If you are to use my plan,

you must stay FOCUSED ON YOUR CHARTS. You cannot be typing posts or BS all

the time.

I do not know how to back test my trading plan except by going back over the charts after

market hours, mark all the trade setups, then compare my trades to see how well I did.

Trading Abbreviations

There are many abbreviations that are used in the document. While most are common to

traders, I list them here as a reference for those of you who may not be familiar with the

trading abbreviations.

DB – Double Bottom

DT – Double Top

HH – Higher High

HL – Higher Low

LL – Lower Low

LH – Lower High

SR – Support or Resistance

SUP – Support

RES - Resistance

PB – Pull-back

The Trading Plan

A trading plan defines what you should know before each trading day starts:

1. Why I enter a trade

a. Short setups

i. Resistance Area

ii. Double Top

iii. Lower High (high failure)

iv. Pull-Back (a move back towards support that was once resistance

until it was broken [a special case of Lower High])

b. Long setups

i. Support Area

ii. Double Bottom

iii. Higher Low (low failure)

iv. Pull-Back (a move back towards resistance that was once support

until it was broken [a special case of Higher Low])

2. Where I place stops

a. Short stops

i. One tick above the high I am trading

b. Long stops

i. One tick below the low I am trading

c. Break Even stops

i. Once target one is hit, move stop to entry price plus one tick.

3. Where I place targets (targets assume trading SP500 futures)

a. Target One

i. 4 ticks beyond entry price

ii. 1 contract

b. Target Two

i. 6 to 8 ticks beyond entry price (depending on how market is

moving).

ii. One half of contracts removed at target two.

c. Target Three

i. Longs – first swing high after entry.

ii. Shorts – first swing low after entry.

iii. OR when the market shows its turning.

1. Can use Center Line Bollinger Bands

2. OR Moving Average

3. OR Whatever works for you.

4. When I would reverse

a. A trade setup in the opposite direction.

My trading plan is very simple, simple, simple. You might think that it would not work,

but it does work day in and day out in any market. Why does it work? Because it

follows the same buyer and seller chart patterns formed by price action which develop as

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