Developing A Trading Plan – Part 2

Time periods and tools used: VWAP / Volume Profile

In part 1, I talked about the importance of doing post market analysis.  Through this homework, I can see factually how market logic played out using my tools. I also talked about doing pre-market preparation.  Pre-market prep is important because this is where I must use what happened (homework) to develop a plan of where the key reference levels are and plan what to do there; buy, sell or monitor for more insight, or look for follow through.

My post market homework and pre-market preparation I must consistently use the following tools:

  • Vwap with it’s standard deviation levels.  These levels produce the value area highs and lows.  There are 6 key levels:
    developing Vwap / VAH / VAL, and the fixed Vwap / VAH / VAL.

    • With in the VWAP levels I must be mindful whether price is inside or outside of value for both the developing and fixed value areas.
  • Volume profile with strong attention to the VPOC, the extremes, low and high volume areas.

*I will focus on using the VWAP and Profile tools on the day and week time frames.

  • The previous days and weeks high, lows, and open.
  • Fib retracement and extension levels for the previous day, week, and impulse legs with in these periods.

At times, I will look at the Cumulative Delta and use trend lines to help further read, interpret, and understand what is happening on the charts.  Though the drawing of trend lines should be done during post market home work and pre market preparation so that these levels are already available during trading hours.

Included equally in my analysis is the daily candlestick bars and the activity on this chart.  Here I will use the 5,10, and 21 EMA lines.  I will identify bracket balanced areas.  This chart will be the starting point for everything I do.

In addition, I must be aware of the activity higher time frame charts like the weekly and monthly bars.  On these charts I will also look at VWAP and Profiles but must understand that I am not trading on these levels.  They are only to be used as guides to see the whole market and bigger picture.  They can also be used to evaluate the boundary limits of moves starting intraday.

Developing A Trading Plan – Part 1

Trading Preparation:

What I should be looking for & looking at

Part 1  | Part 2

Trading is not easy, it requires a lot of focused dedication.  It is easy to spend a lot of time looking at charts without gaining any useful information, at least for me it is.  I need to use my time more efficiently.

I must do my post market homework in an efficient formatted way, otherwise I am wasting time not making use of information on the charts and tools used.

I must have a system for pre-market analysis otherwise executing trades during the live market is just guessing and hoping to be right, or worse gambling without regard to un-calculated risk exposure.

I need to develop a better routine to post market review and pre-market preparation.  Just looking at the charts, marking it up with levels and reference points is not enough.  I need to have a consistent method and reason for choosing levels and selecting key reference points.  If I cannot explain why I select these areas and their relevance then I am just wasting time.  Moreover, explaining what happened alone without hypothesizing how it will affect future activity adds no value to me finding and executing trades.

The purpose of me trading and doing all of this is to grow my account and earn an income.  I must become more structured.  I can only achieve this through better more efficient post market homework and pre-market preparation.

First: Post market homework

After the market has closed all accessible information is known, this should be the easy part.  Here I am explaining what happened and why it happened.  It’s hindsight analysis but important for me to understand the context of the day.  For example, why did sellers sell the high and buyers buy the low based off the tolls I use.  The below chart discusses the logic of what happened in hindsight.



In the above chart, I purposely leave out the price and symbol.  It does not matter what it is, price behaves and gets the same reaction.

Part 2