I have few general principles when designing setups and trade plans:
- Strive for simplicity over complexity
- Positive expectancy with enough opportunities
- Ensure logic supports the methodology
- Minimize the number of parameters with adjustable variables – this will reduce the risk of curve fitting
- Use a combination of initial, breakeven, trailing stops, and time stops when appropriate
- Favor dynamic stops over fixed dollar stops
- Be wary of profit targets – they generally reduce profitability
- Help me avoid fatal mistakes.
- Achieve better time management – I do not become a slave to the market, continually searching for setups and deciding whether to trade.
- Emotionally easier to trade – I know whether a setup exists before a market opens. I know where to enter, where to place stops, and where to take profits.
- The method can be easily validated.