Market Mechanics Ep 16: Building a Trading Plan

[00:02] build a trading plan 101. Professor Brett here. And today that's what I'm show you how to build a trading plan, and I'm going to build it with you live. Right, so here's the problem. Most traders do not fail because they lack

[00:17] effort. They fail because they do not have a clear, repeatable plan. What I basically mean by that is that they open the charts, they see the candlesticks improvise, they start to enter for a buy, and then they just react

[00:29] emotionally. So price up, they enter for a buy, price goes down, they enter for a enter for a buy. And to me, that's not trading. That's gambling. The reason why it's gambling is because you don't have any structure

[00:44] built into your trading. So as a result, your results are going to be chaotic. Just think about it. How can you be surprised when you are inconsistent with your profits when the way you've been executing your trades is inconsistent?

[00:58] sometimes you're entering there. You don't have like a structure. You don't have like a systematic framework that decide your decision-making. All right, so that's what we're talking about in this lesson. And this is a

[01:11] tweet that I've written. If you cannot explain a trade plan simply, you cannot execute it consistently. And if you cannot execute it consistently, you will not get consistent results.

[01:23] Remember, the goal is not to sound smart. The goal is to be consistent. So before I show you how to build a mechanical trading system or a trading plan inside Edge Flow, I want to talk about the theory behind it. Right,

[01:37] trading plan matters and what it actually is, then building one just becomes a waste of time. Okay? So remember, your trading plan, this is not just a random document. This is the

[01:54] thing that will actually help you make the same quality of decision again and again regardless of how you feel. Regardless of whether you feel greedy, whether you are feeling the fear or impulse or any sort

[02:08] of other emotion, whatever. My favorite quote which I repeat all the time during my live trading session is F your emotions. Plan the trade, trade the That is what this lesson is really about. Right? So, what actually is a

[02:22] trading plan? A trading plan is simply a set of rules that tells you what kind of market to trade, what conditions needs to be present, where you enter, where you exit, how you manage risk, and what trades are not worth taking.

[02:38] That's it. It doesn't need to be complicated, right? It just needs to be simple. It just need to lay out all the rules that you need to follow every single day. In fact, the more complicated it is, the

[02:51] In fact, the more complicated it is, the harder it is to follow it under you're emotional, and then you go on to your trading plan, you realize that there's like 10 pages and it's filled with a lot of jargon and

[03:05] you won't even feel like going through that trading plan anymore. failure when you make it too complicated or too difficult. So, yeah, keep things simple. That's just my philosophy. I fundamentally

[03:19] I fundamentally believe that simplicity is the highest form of intellect. All right? That's it. A good trading plan is not supposed to be impressive because it sounds advanced.

[03:31] A good trading plan is impressive because it is clear enough to execute consistently. All right? So, here's why most traders struggle. A lot of traders out there, they think that they have a strategy.

[03:44] But what they really have is a loose collection of ideas. all right? They they know all the blocks, they know supply and demand zones, they know candlestick patterns, they know chart patterns. Maybe they

[03:57] have some screenshots that they save on the phone or maybe like a PDF locked out for. But here's the thing. When the market starts moving live in real-time market condition

[04:11] in real-time market condition speed matters the most. All right, if you don't know exactly what you are looking for every single move looks like a trade that is worth entering.

[04:24] because now you're like, "Hmm, should I enter here? Should I enter there? Maybe I should stay out. Maybe I should just wait a little bit more." Da da da da you know, all of this stupid um inner voice just start to cloud your judgment.

[04:38] Anything that is not clear becomes emotional when money is on the line. So decision-making you're pretty much telling the market, "Hey, I'm just going to donate my hard-earned money to you."

[04:51] when I get emotional I can't do All right, I don't have going to donate my hard-earned money to you. So that's what happens when you don't have a trade plan, all right? As a result, you force entries, you

[05:05] hesitate, you move your stop losses, you cut winners early, you do all of these stupid trading mistakes and just take unnecessary losses. Plays the big games, wins the big prizes. That's it.

[05:22] A clear plan creates repeatable execution. have a trading plan or you have a weak trading plan, what tends to happen is emotions just have more power over you. It just

[05:37] make it more easier for emotions to take control of your decision-making. So yeah, save yourself some time and money by creating a robust and proven Now,

[05:52] remember, our job as traders is to allocate capital wisely. That's right. It's not to, you know, make the most amount of money. That's our goal, but that's not our job. Our

[06:06] job is to allocate capital wisely because you only have a finite amount of capital. You only have 100k in your account, 10k account. Which means that you need to make sure

[06:19] that you're spending it wisely. You need to make sure that you are actually deploying it on the setups that are actually worth taking. should decide which trades are worth risking on, which ones are not, when to

[06:35] participate in the market, and when to stay out. Your plan will be able to protect your capital from low-quality decisions. You should be able to know what define an A+ setup, what define a B setup, and a C

[06:48] setup. And you only want to make sure that you're deploying your capital on the A+ setups. So, a mechanical system is not about being robotic. It's about removing unnecessary emotion.

[07:03] It tells you what to look for, what must be true, what invalidates the setup, how to manage the trade, and how to review the system. A mechanical plan turns trading from vibes into data.

[07:17] vibes into data. That's the power of a mechanical plan. Right? So, once again, just understand that you need to have one and you need to keep it simple. Right? Because the reason why it needs

[07:29] to be simple is because you need to apply it in real time without confusion. But when there's confusion, when your trading plan is 10 long, what tends to happen is that, like I said, emotions take over.

[07:42] Okay? So, the purpose of a mechanical trading system is to remove all the discretion from trading. It's to remove all the unnecessary emotion from So that when you're in the heat of the moment, there is no room for guesswork.

[07:56] There is no room for emotion. There is only room for execution So, what a trading plan does is that it literally give you the structure, right? So, that is what makes it mechanical.

[08:10] So, that is what makes it mechanical. It's something that is clearly defined and is measurable and is repeatable and is scalable.

[08:22] actually mechanical, what tends to happen is that your execution becomes Which is a huge thing, right? Because now you're always losing a small amount you're actually making a lot of more money.

[08:36] Second thing is that your journaling becomes much more honest because now you followed the plan or not. Right? If the trade followed the plan and you make money, great. This just give you like an ego boost and you also

[08:48] give your trade plan a boost. Now you have data that actually allows you to trust a trading plan. Right? Because men lie, women lie, but numbers don't lie, right? Thirdly is your review process becomes

[09:00] much more useful because now you're no longer reviewing random trades that you're taking on a Friday night. You are actually reviewing a system, trades, you're actually reviewing the effectiveness of the trading system.

[09:15] And that give you the data you need to improve that trading system. So, yeah. That's how important it is to have like a mechanical trading system.

[09:29] part which I talk about what should a good trading plan answer, I want you guys to adopt this philosophy which is called plan first, trade second. A lot of traders do the opposite, right?

[09:41] They open the charts, they trade first, then they try to decide what to do next. when price comes here or get out when price comes there. opposite. They decide in advance what they are

[09:55] willing to do. And then they just wait for the market to meet those conditions. So, that's a huge difference, right? Because one is reactive. The retail trader is reactive, you know, he's just trading for the sake of

[10:09] adrenaline, trading for the sake of excitement, trading for the sake of But the professional trader is intentional. intentional. He knows exactly what he's looking for.

[10:23] And he knows exactly when not to trade. He's like a sniper, right? Who is just next good trade and then the next good trade. So, yeah. Plan first, trade second. So, that when the hits the fan, at

[10:37] least you're well prepared for it. And trust me, the always hits the fan, right? Always. Yeah. So, just don't leave any room for guesswork or emotion. Your plan should

[10:49] tell you exactly what you're waiting for before the market even gets there. If price comes here, I'm going to enter for sell. And then when price does eventually go there, all you need to do is just execute. That's it. You don't

[11:02] this? Should I do that? Maybe I should do this." No, there's no room for like discretion. Because you have a mechanical trading system. plan should do. A good trade plan should give you the answers to simple questions

[11:18] What market conditions do I want to be trading? Is it the bullish market condition, bearish market condition? Is it when price is in a continuation phase or a pullback phase? What makes a setup

[11:32] valid? Right? Must I get a my bias and I must I need to ensure that aligned with the higher timeframe trade bias, must it be located at a specific

[11:46] supply and demand zone or order block. Right? What makes a setup valid and What makes it invalid? Right? So, if price actually comes down and break past looking for longs anymore because that pretty much tell me that that one zone

[12:00] effective. to place a stop loss? Where to place your take profit? And most importantly, when should I stay out completely? What are the market conditions that I want to

[12:13] avoid at all class costs just like a plague? Right? Maybe on Mondays, right? The market condition is not ideal. Maybe during high impact news. Maybe during holiday seasons. Right? So, when should I stay

[12:26] If your trading plan cannot answer these simple questions right here, it is not strong enough. You need to go back to the lab and just make it even stronger. Yeah.

[12:40] So, that's trading plan. And Okay, here's a common misconception. A lot of in order for you to become profitable at trading, you just need to be disciplined. Right? So, discipline means forcing yourself to do hard things.

[12:54] But what they fail to realize is that discipline actually becomes a lot easier when the plan is clear. So, when you have a trading plan, you actually don't really need to be super disciplined.

[13:06] Just think about it, right? The definition of discipline is to do the feel like it. When you don't have a trading plan, you have no choice but to try to use your willpower to try to be disciplined in

[13:22] control yourself. But when you have a trading plan, you have a structure, you know, you are not negotiating with yourself. You're not asking, "Should I take this trade? Maybe this is close enough. What if I just

[13:35] You already know where you are entering for the trade. As a result, you already have the structure, you already have an idea. You willpower. All you need to do is just execute.

[13:48] That is the beauty of a mechanical trading system, right? It allows you to like just not negotiate with the inner emotional damage. Means less losses. As simple as that.

[14:06] you how to build a mechanical trading system live in Edge Flow. This app is called Edge Flow for a reason, because it helps your edge flow into execution. Edge Flow literally stands for Edge plus Flow. And your edge

[14:24] in this case is your trading plan. Your flow is how you execute it on a And the thing is, most traders, they have an edge in their head or in a PDF, but it doesn't translate into consistent actions. Because sometimes they forget

[14:40] review it, they don't feel like reviewing it. But with Edge Flow, Edge Flow turns it into a workflow that you can follow every single day. Okay? Like, this app is built in a way where it connects the whole loop. Plan your

[14:55] trade, prepare for the session itself, execute the trade, journal your trade, review the trade. So your edge doesn't break when emotions hit. Now, the reason why I believe having a trading plan is so important is because I believe that a

[15:09] trader's job is to allocate resources wisely. Since we only have a finite only have a limited amount of money. So we want to make sure that every single trade that we take is a high probability setup. And that's where your trading

[15:24] plan comes in. Your trading plan decides what trades are worth taking and what trades are not worth taking. Let me show you how I build my mechanical trading system inside Edge. So, like I said, Edge is just like a

[15:36] simple trade plan builder. All you have to do is to come in here, create a plan just like this, and you just fill up all of the necessary fields in here. And it start off by naming the plan. And if you don't know where to start, feel free to

[15:49] use the presets that we have right here. These are proven templates, proven trading systems for my coaches inside my mentorship program, the 1% Club, with over 20 years of combined trading experience. Right, so we can verify that

[16:02] these trading strategies, these trading plans actually work. But yeah, if you you can check out these templates right here, but just know that they are uh simply a starting point, right? You still have to customize it so that it

[16:16] suits your trading style, it suits your trading personality. You adjust it to fit your risk tolerance. Okay? But anyways, let's just try to build a plan first, put a name right here. Let's call it

[16:29] Market Mechanics Plan. Right, this is where you can give a name to the setup plan itself. Right, so maybe I'd like to call it the liquidity sweep entry model. All right, and then this is where you

[16:42] want to add your charting process. So, this to me is the most important part of building a trading plan. It's to de- termine the bias, right? It's to identify what's the trend direction, it's to map out our what point of

[16:56] interest, it's to determine what is the location in which we want to enter the trades from. Right, so that's where charting process come into play. It's how you turn a blank chart into a system, so you know exactly where to

[17:10] buy, where to sell. That's it, right? That's the charting process. Right, so this is where I put like little bit of top-down process, what I do on a higher time frame, what I do on a medium time frame, what I do on a lower time frame.

[17:23] So, just to give you a quick little example, you can see like this one right here on this A+ setup checklist, these are the steps that I have in my charting process. All right, if you know how I trade, you will understand all of

[17:36] might want to consider checking out my YouTube. But yeah, like this is just the YouTube. But yeah, like this is just the entire charting process which I take chart. All right, I know that okay, these are the things that I need to do

[17:49] market, in order for me to just build a narrative on the market. Okay? So, yeah, the goal of this charting process is for you to just turn a blank chart into something you can work with so that you can develop a trade bias. All right,

[18:04] that's it. And then this next section, this is where you can put your entry criteria. All right, so let's say my charting process allows me to mark up this beautiful supply and demand zone. Okay, now price

[18:16] demand zone, and now I want to enter for confirmation? What's the entry triggers that I need to see appear in the market before I enter for the trade? Well, that's my entry criteria. All right, so

[18:29] things that I want to look out for, right? The confirmation, the non-negotiables that must be true before I even think about pressing the buy and I even think about pressing the buy and sell button. And if every or any of

[18:41] these criteria is not met, I would just not trade, right? Like that's it. If even just one of these boxes are not being checked, that's how important the entry criteria

[18:54] I see a setup, it needs to check off every box within the entry criteria itself. Yeah, and then below here, this is where I also paste like some screenshot of my entry models, right? Just for me to like remind myself, okay,

[19:09] this is the setup that I'm looking for when I come on to a blank chart, and this is an example of the setup itself. Yeah, so you can place some chart reference points when you are trading. And then below here, this is where you

[19:23] So once again, this is something that you can type. You can literally type you are in the position itself, right? Whether you are going for set and forget stop loss, whether you are taking partial profits. If you are trailing

[19:38] your stop loss? If you are taking partial profits, are you going to be taking partial profit at 50% or like 100% or whatever? You need to define the terms in which you want to be managing the trade itself right here. And then

[19:52] your exit criteria, right? Which is very very simple. There's only two sort of exit criteria, to be honest with you. Number one is where do you want to exit if the trade

[20:04] ideal does not go as planned? Right? So like where do you want to get out if decide where to place your stop loss, right? Maybe I want to place my stop loss at the low or high of the liquidation candle,

[20:19] or below my support level, or above my resistance level, whatever it is, right? And then another scenario that you need to think to account of is where would I get out if my trade play out in the way I envision

[20:33] it to play out, right? Like if price actually goes in my desired direction, where do I want to get out of at if I'm right? Okay? So this is where I perhaps I might say I want to take profit at the next swing high or the

[20:45] right? This is how you put your exit criteria on paper. So now you know exactly where you want to get out when price goes wrong, when things go wrong, and things go right, okay? Remember amateurs focus on entries, professionals

[21:00] obsess over exits, right? So make sure you have a very clear ideal on exactly where you want to get out of the trade at all times, before you even enter the where you can put some trading notes as well. For me personally, I like to put

[21:15] some reminders. I like to put some philosophies. I I like to put some quotes in here. Uh and you can also put common mistakes. You can even put market right? So, these are kind of like the rules that you want to follow

[21:31] to protect you from yourself, right? To protect protect you from emotions, reminder to myself, okay? Yeah, so you can just put whatever you want in here. This is fully optional. And bam, there you have it. Now, on the

[21:44] notice on your trade plan, you will see your guardrails in here. So, you don't have the ability to change your guardrails in Edge itself. If you do want to modify your guardrails, just press this button right here, and this

[21:57] is like the modify guardrails button, and it will direct you to settings, guardrails in here. And whatever guardrails you apply here, it's universal across every single trade plan, right? You can see every single

[22:11] guardrails, right? So, if you want to change your guardrails, you can just will get directed to the settings. Next up is once you save the trading plan, it becomes read-only, right? You can see I can no longer edit the trade

[22:26] plan. I can check off the boxes right here right here right right nice, but I here right here right right nice, but I can no longer edit the trade plan. And this is useful, right? Because when you are trading,

[22:38] okay? We have this banner that pops up every single day that to remind you to this is also part of your pre-market routine as well, if you actually set it as that. So, what happens is that when you press

[22:51] open trade plan, you can see this is what you will see, right? You will be able to review your entire trade plan that you have set as active inside trade plan, you have went through the charting process, the entry criteria,

[23:03] you can just press market's review and the banner will disappear itself. And also, when you are trading, if you go to trade plan right here, you can also trade with your trade plan right next to you as well. If you want uh more

[23:16] guidance, more structure, more support, right? You can analyze the charts while you're doing this mapping process, you can look for your entry models while here. So, that's Edge, okay? And yeah, that's

[23:29] plan as active. When you set a plan as active, it get pinned on the top and it's literally everywhere, right? On your trading platform, it appears here, right in your pre-market routine, it also appears here, it becomes your

[23:42] default trading plan. All right, that's how the the active thing work. That's how you actually activate a plan. And also, when you take a trade, right? close the position and you go on the journal, it will automatically tag that

[23:57] trade as the trade plan that you have on active, right? So, in that case, you could saw you could you saw that my active trade plan was the A+ setup trade right here, you can see, by default, it always tag it to the active

[24:11] Yeah, and then you can come into journal, you can select whether you did not. And then, based on this, right? It will create your plan stats, right? So, if you go back to the Edge itself,

[24:25] you can see, this is your trading data. This is the statistics that we've compiled based on the trades that are tagged to this trading plan in the trading journal. All right, so like what I've showcased

[24:39] to you earlier on, on your trading journal itself, you have the ability to go to individual trades and just like tag it to the trade plan that you whether you follow all the trading plan or not. And then, when you do this,

[24:52] what happens is that when you to to Edge, we are able to show you how effective the trade plan actually is, right? Based on how many trades you have taken, what is your win rate while you're using

[25:06] this trading plan, what is your P&L, right? How much money you made or lose plan, and what is your compliance, which is did you actually follow your trading plan or not? Right, because just now, as you recall, when you go on the trading

[25:19] journal, you have this check box where you can tick I follow my trade plan. So, you did, it will also reflect in this compliance score right here. Yeah, so this is simply the percentage of trades where the required checklist steps were

[25:33] followed. So, this requires you to be brutally honest so that you can actually see how each one of your trade plan performs. And when you do this, this allows you to make data-driven decisions instead of

[25:47] decisions based on vibe. Instead of saying stuff like, "Oh, today this trade plan didn't work, so I'm just going to switch to this other trade plan. Oh, my I'm going to just going to switch to another plan." No. Now you can actually

[26:00] another plan." No. Now you can actually make data-driven decisions, right? But honest with your trading journal, right? You want to make sure that you don't lie is going to be looking at your trading data other than yourself. Be brutally

[26:14] honest, grade your trades based on the trading plan, and this is where you will be able to like really just see which are the trading plan that tends to perform well, which one is just not that effective, and then you can just double

[26:27] down on the plan that actually works. So, yeah, that's it. the entire Edge system. That's how you build a trading plan inside Edge Flow, and that's how you actually like just integrate the trading plan into your

[26:42] entire trading system so discipline becomes automatic. So, I just want to say just going to end off with like a final piece of advice. When you are creating a trading plan and you start follow your trading plan, as

[26:55] you start follow your trading plan, as time passes, you want to adapt. Okay? plan blindly. You should treat your trading plan as a living, breathing organism rather than a scripture. Because as the markets evolve, market

[27:10] conditions change, which also means that this trading plan will not be as effective 5 years from now compared to today. Right? So, as the markets evolve, you want to tweak it. You want to test it. You want to adapt it.

[27:24] Because if you follow the same plan for 50 years without changing anything, then you are not trading the plan. The plan is trading you. Right? So, make sure you evolve your trade plan as time passes and slowly but

[27:36] trade plan as time passes and slowly but surely just continue to seek to improve this trading plan. And then, as time passes, this trading plan will just get bulletproof, and you will start to see your trading results compound as well.