Factor Trading Plan

 

  The Facto Facto r Trading Plan

Factor LLC trades real markets in real time with real money with a real performance record. The markets traded by Factor LLC include futures, forex, ETFs and stocks. The Factor Trading Plan governs the trading activity of Factor LLC and is based primarily on classical charting principles as defined and described by Richard W. Schabacker ( Technical Analysis and Stock Market Profits) and Robert Edwards and John Magee (Technical  Analysis of Stock Trends). Classical charting principles attempt to understand market behavior by identifying recognizable geometric configurations such as:   Head and shoulders tops and bottoms   Symmetrical triangles   Right-angle triangles   Trendlines   Rounding pattern   Channels

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  Double and triple tops and bottoms   Flags and pennants   Horns or sloping patterns   Rectangles   And the like

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 As a general rule, Factor establishes positions at the breakout or completion completion of these patterns. Factor focuses its search ffor or patterns on monthly, weekly and daily bar charts and does not intentionally enter day trades. Factor may utilize a variety of risk management techniques, and as a general rule uses a risk per trade between 25 basis points (1/4 of 1% of capital) and 100 basis points (1% of capital). Factor expresses trading size, or leverage, in units of $100,000 of capital. The types of entry signals and methods of trade management designed into the Factor Trading Plan are shown in the grid below:

 

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Factor Trading Plan – Signaling and Trade Manageme Management nt Trading signals – Trades Tra des given ful l Trades given duration of chart berth; stops moved moderate berth; patterns Six months or longer (monthly and w ee eekly kly charts); reversal reversal or continuation patterns 10 to 25 weeks (weekly (wee kly and d aily charts); reversal reversal or continuation patterns 6 to 9 weeks (daily charts); continuation patterns Less th an 6 weeks weeks (daily charts);

hesitantly; profits taken at target

stops mo ved a actively ctively according to rules; profits take taken n at target

Trades guarded tightly; stops moved quickly and aggressively; aggre ssively; quick profits t ake aken n

Currently employed

Inactive

Currently employed

Currently employed

Inactive

Currently employed

Inactive

Inactive

Currently employed

Inactive

Inactive

Inactive

continuation patterns

During the history of trading by Factor all of the above combinations have been employed, depending upon the type of markets judged to exist. As of this writing, Factor is using the signals and trade management techniques indicated above.

Fa Factor’s ctor’s Primary Focus

Factor’s primary focus is to identify and trade in real time those 10 to 20 chart patterns that will, with the benefit of hindsight, stand out as the best examples of classical charting principles each year. Additionally, Factor will trade shorter-term patterns (6 to 9 weeks in duration) with the intent upon taking quick profits of between $500 and $1,200 per contract.

Trading Lesson s Learned by Facto Facto r During t he Y Yea ears rs

       

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Except for a few tremendously gifte gifted d traders (not including me), day trading is a loser’s game. Trades decided upon at a moment in ttime ime during act active ive market hours have contributed negatively to my net bottom line Managing my emotions (fear, greed, false hope) is my primary challenge in trading. It is better to miss a trade all togethe togetherr than to be obsessed about being in a certain market. 2