How To Create A Consistent Trading Plan

Hi guys, Anthony here, as you can see, from home. So still operating fully online at the moment. First of all, I hope you and your family and friends are all well in these obviously difficult times, but hopefully some tips and advice that we can share from you from a markets perspective and certainly from trading and risk management. We did a really great webinar at the beginning of July and we had some great feedback, so I really wanted to just take that private webinar and share it with you guys publicly. It goes into things like the actual Amplify Trading process that we get all of our traders to do as their core kind of foundation of their strategy development. So hopefully you find it interesting. Hopefully as well it is a benefit to your trading performance and your further development going forward. Any questions, of course, just feel free to leave a comment and remember to like and subscribe to the channel. We really love the engagement and the growing of our community online. So thank you everyone for that and enjoy the session. Thank you.

To kick things off, we have what we call an Amplify process, which is the way of which our guys would approach any trade of which they take. And it would go through basically a sequence starting from the top, which is fundamental analysis. And that's in itself a little bit unique, I guess, to us. We would be classified as a global macro discretionary multi-asset trading firm. I know that's a bit of a mouthful, but in layman's terms, what that basically means is global macro. We are looking at the overall events that are happening in the world that have influence over markets. So whether that's COVID, trade war, Brexit, these types of issues. So we are using that as a key component formulating our trade strategies, our analysis fundamentally, of what we think about these subjects to create a directional bias. We then move that to technical analysis, which is kind of the— probably the most regular form of how a non-professional or retail trader would trade, which is using various different technical indicators. But again, that's crucial for us to create a framework of how our guys would formulate then an action, basically a fundamental view they have on markets, developing and building their strategy, Execution of the strategy, and this is really those two steps where the risk management side of things will come in, of which Sam can go into more detail. Exiting the trade and then reviewing the trade is the sequence. So one of the main, I guess, regular things is feedback from the retail trading community that we hear is a common mistake is overtrading, kind of just trading price movement without really understanding the reasoning behind it. And inherently then that leads to lots of false kind of breakouts and price movement, and that can lead to overtrading, mismanagement of trades, these types of common mistakes. What this process basically enables you to do then is to have a process in place that keeps you honest then that you are following a correct procedure before initiating any trade idea. Not only that, it requires a period of self-reflection, both from a data point of view. So this is where Alex does such a great job with our traders, is really developing accumulation of information about your performance. You know, what did you trade? When did you trade it? How did you trade it? What was the technique? What was your— what was your execution against its intended place, you know, what was the circumstance. All these different things get monitored, reviewed, and backtested, and then you can refine your performance from there. So if you think about it, if you are adopting this type of strategic approach, you are in a sense, um, able to effectively control what it is that you're doing and hopefully make more appropriate actions. Moving on then, next steps. I'm going to just quickly go through, and I'm going to summarize this. And then, because really I think the, the quality information is going to come from Sam when he talks about some of these points, uh, from the people that he works with closely every day. So from a fundamental perspective, to talk through every one of those points just quickly, fundamentals can either be broken down into two distinct sections. Scheduled and unscheduled elements. So these would be things like your daily economic calendar, data, speakers, anything that can effectively influence the market. Unscheduled would be things that are unplanned, but I mean, I'm sure some of the pilots can probably testify to this, is that you can strategically plan for the unexpected. With markets, for example, there are certainly a number of hot topics that are very influential at this point in time. So rather than kind of clouding your judgment and thinking about every single permutation, you can think about what are the most highest probability scenarios that could effectively materialize. And then from that, you can start to then extrapolate, or what are the potential strategies that I could need to prepare for. And within that, then creating a hierarchy of what would be our kind of base case scenario, down to things that would be, say, secondary lower probability events. All of this though defining a predetermined course of action that you would take under these situations. So with unscheduled news, definitely I think you can prepare for that. And this is really an area where I would work I work personally with the guys a lot on during our training program because this is an area which is very difficult to learn from a textbook because ultimately the fundamentals are changing all of the time. And unlike a fixed technical level in printed on a chart and fixed in history, fundamentals can have different implications for prices depending on what's being priced into markets, essentially. So that's fundamentals. By going through your, your process, ultimately you're trying to define whether or not you want to be long, short, or not in that market, which is a perfectly adequate assumption to make upon going through your kind of due diligence. So directional bias, long or short. The technical analysis situation Charting time periods. And again, I'm going through this very quickly, so the guys who do train with us, we will go through this in a lot more detail. But to give you a top level, um, start with higher time frames. What is the bigger picture? Don't get too absorbed with, you know, tick-for-tick price action where the world looks like it's changing rapidly minute by minute. Always best to start big and then come in in that regard. So looking at the weekly, daily picture, then looking at the more defined kind of 1-hour price action, half an hour price action, 15-minute price action, and so on. Different technical tools— there's obviously lots of them. Um, we are Amplify, are not here to say this is the best tool, thou must use this tool. That's not how we operate. We, we essentially equip our guys with knowledge about how each one is best used and in what conditions. And then it's about the trader really utilizing these as and when they see fit. But naturally, given that self-reflection period, um, traders will tend to gravitate towards liking a certain type of setup that they'll probably deploy more often than not. So that's the technicals— different time periods combining different tools. Obviously from a conviction point of view. The more flags you get from a technical point of view, if you have multiple signals all firing at the same time indicative of the same course of action, then that's when you've got a high conviction rate and you can trade with bigger size, for example. Building the strategy— this is when it comes then down to the more of the nitty-gritty, and I guess this is when, um, a lot of this starts to play into then the psychology but also the risk managing. That is the entry price. The accuracy is key. Identifying your most optimal point of getting into a trade, your stop, quantifying your risk— these are all the things that Sam's going to talk about in a moment. Managing that trade, whether proactively depending on market conditions, depending on whether you're intraday or swing trading, will all have different repercussions about how you would want to handle the execution and management of that trade. So that's your framework. Your execution, the placement of the orders. I guess the one I like best about this top box is this idea, very simplistic, about do not hesitate. And this is a very important point with trading. You know, you go through this process to try and eliminate irrationality, that if you've done a structural process of fundamentally and technically assessing a situation, then there is no need to hesitate. And that's easier said than done and will come with practice and repetition. But the idea here is that markets are currently always in flux and moving, and you need to be in a position where you've got to hit the button with, with absolute conviction in order then to facilitate that trade in its most optimum point, which is then getting the fill of where you want. Now sometimes there's different ways to exercise a trade, whether at market price or whether limit orders and so on, but the idea here is, you know, fundamentally you have to take risk in order to trade, and then it's about Managing that, and that's obviously where the management of the trade comes in. Patience, it's kind of that resonating word that you hear again and again with successful trading, it's patience. I was just talking to a group of interns not that long ago, and we were talking about this idea of one good trade, and that's all it takes, you know. Less is more, almost, in this sense of the practicality of actually putting a trade on. You know, it's about having that one good opportunity and exercising it, executing it in the correct fashion is all it takes. You know, more effort doesn't equate to more profit in this sense. So having the patience as well to just have the confidence in letting the market play out. Obviously, common mistakes would be having too tight a stop loss, changing your mind, moving the trade around as it's developing, perhaps in an inappropriate way. So again, these are all common things, and Sam's going to develop that conversation in a moment. And that's, that's really the, the overall situation. I mean, the rest here then is exiting the trade, tidying up your order book, and then reviewing and repeating. And this hopefully is a, is a good overview of generally very top level about the approach of which our guys follow and are disciplined to this approach in order that then they're making a selective decision to trade the most high-quality opportunities that present themselves day to day. All right, Sam, do you want to come on and talk about the— these sections then from here forward?

Yeah, absolutely, absolutely. Yeah, cheers.

I could do the slides from here if that makes life easier or— Yeah, yeah, yeah, let's do it.

Yeah, if you want to get all of these up, I don't know if they— Well, we'll go through them one by one. So yeah, like Anthony said, I started out my trading career, if you like, with Amplify over 5 years ago now and then went away, traded myself, traded in a small fund, and then came back to Amplify as a sort of junior mentor and progressed through then. So I've worked with, well, I guess thousands maybe of, of traders over the years, um, and seen obviously some good, good habits and bad habits. So this, this will be sort of on risk management, going over some common mistakes, um, that I see and that I've also made myself. Um, so, you know, on the talk of risk management will be it. And I've seen there's some good questions in the Q&A, so Alex can answer those as and when by typing, and also I can address those at the end as well, no problem. But one of the main things I see happen, and we're all guilty of this early on, is trading with no real plan. I mean, sometimes you've got to go through the pain to realize, you know, it's not the right thing to do. But I do a study with the traders on our career program where I give them you know, after they trade in the morning to tell me their best idea. And we then review it at the end of the day. And if they had stuck to that, you know, idea where they stuck to their process, the trade results would be a lot better than maybe, or is, is when they sort of trade on a whim, having no real plan, reacting to, you know, the 5-minute candle that goes up. Okay, I'm gonna buy, and so on. So Yeah, I think it's— I always say if people ask me what the most important things for trading, I say discipline and routine. And if you've got no real plan, then you don't have the other two either. Having no maximum loss limit per trade or day. This is important, it really is. If you're not in tune with the markets, you've got to know when to stop. Now, your max loss limit per trade or day is up to you. You know, there, there is no, it has to be this, it has to be that. From a personal point of view, I, I don't risk more than 1% on a trade. And some people will say 2% or 5%. Again, up to you. Some people would do it as just a straight monetary value, but it's keeping that consistent. It's not allowing yourself to go over it. Having that routine before you get in a trade is key. But also after. Good trade, I've gone for a walk. Bad trade, I've gone for a walk. 3 losing trades on a product, that means I'm way out of touch with the market and I don't want to be in it anymore. So having a— it's very important to set that loss limit, knowing when to stop before you then decide to go all sorts of crazy, emotions are out of control, and it can really lead to the blowing up of accounts. Next one, adding to a losing position. We've all heard about the intraday trade that turns into a swing trade where you buy a position. Let's just say they're, you know, nice area of support, you really like it, you've got maybe a bit of a fundamental bias that it goes higher. It goes lower, but you still think you're right. Okay, well, let me just add a bit here. Let me add a bit more. I'm so confident this is going to go higher. Well, hang on, next thing you know, headline comes out, we push lower. I still believe it. And you know what, I'm going to leave this on for a couple of days. We're all guilty of it at the beginning. I've done exactly the same thing, and it can be painful. You keep— the worst thing that can happen with this is you get away with it early on. You have this false hope you're better than the market, and you know, you saw that with, with traders at the beginning of the year, sort of February, March time, with long equity positions that have got away with it for so long, when then suddenly we drop 30% and people's accounts get blown up. So, you know, start with that stop loss, which we'll come on to later on. Tell me you're wrong and just accept that. Next one to go through on the list, you just press next, uh, Anthony, for me. Moving a stop during a trade. Yeah, yeah, one of the, the key things is, you know, you're, you're in a losing trade, it's coming towards your stop, and people don't want to accept that they're wrong. And a lot of this comes because they got into a trade where they didn't really think about it. If you can get into every single trade where you have already decided where the trade is no longer valid you can kind of already get into the habit of accepting the defeat. You've accepted the loss. If that happens, fine, I knew that. I knew that if the trade, if the market price went to this level, I'm wrong anyway. However, when people start moving the stop and suddenly that risk-reward gets skewed, suddenly you're putting more strain on the win percentage and it gets bigger losses. That plays with the emotions and then you dive straight back into a trade and it can really, uh, you know, spiral out of control. And next one, next common mistake, uh, to, to go through here is, is not knowing when to stop. You know, I, I see this with, with new traders that, uh, a common thing they'll do is get in and losing, have a losing trade which might even be a nice trade to get in, uh, and then they get in again and then again, and it's— you feel like the market owes you something when really you've just paid for the information, you paid for the lesson. Now stick to your routine and, and go from there. But not knowing when to stop is, is one of the most important things that a trader needs to realize and decide that. What is your loss limit for the day? What is the loss limit for the week? This is— it's a long game, trading, as we all know. It's not about 5 trades, it's not It's not about 10 trades, it's over the course of a year. Have time, you're gonna have days where you're absolutely not in tune with the market, your edge doesn't work. Decide when that happens and move on. Trading over news, volatile periods, you know, if you're already in a trade and you decide, well, let's just have a little gamble here and hold it over, over, you know, this is something I see happen a lot. And again, the worst possible thing that can happen is that it works. Because then you size up, then the losses will get bigger when you eventually do get stopped out and your luck runs out, um, as well. Now, next one, taking on multiple correlated trades at the same time. My, my personal opinion is certainly on an intraday basis, I don't want to be in more than 2 markets at one time. I also don't really want to be in, say, 2 dollar-related positions at one time because effectively you are doubling down, especially if the dollar is, is the main driver for that day and those markets are correlated. So this could be an issue I see with traders where they end up getting 5 ideas, enter them all at the same time, too much is going on. And one comment can change that all when you get stopped out and suddenly you've lost 5 trades. If you're then risking 2%, suddenly you lost 10% of of your capital, and that really then leads these emotions again and psychology takes over. All of this is summarized by not really having any rules or any guidelines. And I really encourage, we really encourage traders here to make sure they have their own routine. The process that Anthony went through is our way of going through, you know, each trade from the beginning, taking our time. And obviously each trader can, you know, tweak things here and there as well. But yeah, having no rules, no guidelines, thinking you can just sort of come in and click buy, click sell based on what can happen, eventually it's going to catch up with you. Moving on to sort of how to best risk manage these trades, good bits of advice. Ask yourself, how much am I risking on this trade? Is it going to be a percentage from now on? Is it going to be an R, that R amount, that monetary value? That people talk about. If you always decide in your trades, I'm never going to lose more than, let's just say, £100, you've controlled your risk. Then all you've got to work on now is how much am I looking to make, what is my win percentage, what are my stats telling me, what is my best market. If you control that risk every single time, happy days. And you can start accepting these losses are part and parcel, they're part of the process. The moment you start moving stops, the moment you think, you know what, I'm gonna risk 4% on this trade because I've had 2 losers, is when it goes out of control. Next one, uh, start with a stop loss. One of the best pieces of advice, uh, I got, I got told is start with your stop. Decide when this trade is wrong, and then where you decide then to enter, can you afford this trade? That— is it more than 2%? Is it more than £100, $100, $1,000, whatever you decide that monetary value of the stock to be? Because if it is, you can't take that trade. Next one: am I near risk limits for the day, for the week that you've set yourself? If you are, if this losing trade would take you over that, again, you can't take that trade. Discipline and routine. And you should— well, my advice would be always have a checklist. Eventually that becomes autonomous, of course, with experience. But if you're taking your time every single trade to review it, follow the process, you're going to stand yourself in better stead going forward. Have I stuck to my plan? Whether that be the Amplify Trading process and routine or your own one that you follow. And this is, you know, this is based on intraday trading, but I follow my same process for medium-term swing trading, or if I were to look at a stock as well. The moment I decide to differ from that, effectively I'm gambling. I'm going away from what I know works, and why on earth would I do that? So you've got to keep reminding yourself, be in control of what you do. And you know, with a losing trade, if I've stuck to the process Like I've said, I've already accepted that that could happen. Where will I be coming out of this trade for a win? You know, a lot of this we're talking about controlling the losses, but you want to be thinking about, you know, where the, the winning part of this trade comes from. Where are my targets? Are they realistic? Reviewing your trade journal can help so much with risk management. You know, what is the optimal amount? Am I coming out too early? Am I leaving a lot on the trade each time? When I interfere, is it the wrong thing to do? Understanding this is very key going forward. Also, you know, just sort of carrying on that point, to look at the stats when reviewing is incredibly useful. You definitely do get people that are of the view that a trade journal isn't really that helpful anymore, but certainly at the beginning of a trading career, it really, really can be helpful. I think it's imperative personally, you know, you want to look at things like, if you just click next, you know, what is my best product to trade? You know, people will a lot of the time think, oh, I'm wicked in this market. I last year, I could have, you know, sworn I'd be really good at trading euro pound or pound against the dollar just because, you know, I have this, this view that pound was going to keep going higher into the election and And while it did, a lot of the time I was trying to get in too early, and that turned out to be one of my worst markets. So the stats can tell you what you're best at. Stick to what you're best at. Also, what's the best time of the day for you to trade your edge that you've developed, that when you stick to your process has the best chance of working? Is it a certain day? Is it when there's no central bank meetings? Is it after a cash open? This information will help with the risk management. Also, do I trade news better or worse? These things are important. Do I trade momentum strategies better? Do I trade better when I have more than one or two technical studies? These things the stats can tell you are just so, so influential on your trading. And have you backtested your idea? Alex here, you know, he absolutely loves backtesting. And it's so important. Why would you take on a strategy with real money without knowing, has it worked previously? While you can build up your stats, you can have an ideas journal and stuff like that, go back and see, does it work? When does it work best? And then you can obviously pick and choose little bits of that information as well. Moving on to sort of real, real-time examples, you know, if I was to to be looking at a chart now, you know, one of the things I always want to be, be thinking is, is there anything that is coming out? So obviously right now there's no big data that's left in the day, but is there anyone speaking? Is Donald Trump about to come on the wires? Is there, you know, any further comments after Rishi Sunak's talk earlier today? These are the type of things that I'd be thinking right now? Uh, the cases in America, for example, what the percentage is like day, day on day, week on week. These would be the questions I'd be asking right now. I'd also think, is the time of day appropriate for my expectations of where the trade could go? Is there enough time left in the day for there to be a big move or, or not? You know, if it was earlier on in the day, midday, yes. Maybe my trade idea could come in now. It's coming towards the— well, we've had the European close, we're into the evening. Is there much left, or am I starting to wind down as the rest of the trading world does as well? If it, like I said, it was early, I'd be choosing my area of interest, thinking where could I get into the trade, where's the appropriate point that the market agrees with me, where I've thought about my risk, I can afford the entry to stop, my targets are realistic, and there's no headlines coming out, fine. This level for me, if we come here, I'm interested. If not, fine, loss of opportunity is better than loss of capital. Other things to think about: where does my stop have to go to give me the best chance of winning the trade? You know, Protect your stock. Give yourself an area of support resistance where you're giving yourself the best opportunity of getting in, you know. And then ask, can you afford that? Can I afford having my entry where I want? Or actually, to have my stop in the best place, am I actually now risking more? Where should my targets go? What's my risk reward? Is that consistent with the way that I trade? Am I putting more pressure on this win percentage? Am I risking more than I would have to? Does this look good risk-reward similar to my profile? That kind of question is what I'd be asking right now. And to be honest, if any of those are no or unsure, there's no trade. The moment one of these you get flagged up, fine, move on. Where is an area that suits the trades that I like to take? Stick to your edge, I think, is the most important thing. When people trade on a whim or combine too many strategies, that's when it can get out of control. So hopefully, guys, that helped a bit there. And I'll be having a look in the chat for any questions. Anto, Alex, I don't know if you guys want to say anything, but yeah, it's one of the most important things along with, you know, psychology once you can trade, of course, is the be all and end all, but controlling that routine discipline risk management can really take trading to, to the next level.

Before I just wrap up though and show you a few other useful resources that I can share with you guys, um, Piers Curran, who is our head of trading and co-founder of the firm, is with us on the call. And so the topic has been risk management. Piers, I don't know whether from a very top level, from your experience, that you could, um just give a few words on that subject.

Yeah, great. Yeah, and sorry for late joining, so I won't, um, take up much time. But other than to say the obvious, which is, you know, I definitely think ultimately if you don't master the management of risk, then you're guaranteed to fail. Um, there's lots of sayings in, in trading You know, stuff like, you know, you've got to, you've got to learn how to lose before you can learn how to, to win from a profit point of view. You know, discipline. I think the, the hardest thing about trading, certainly in my experience— and look, I've been, been trading for 20 years, and it's obviously very difficult, to say the least, from a sort of consistency point of view. And I've been involved, you know, I've traded for different companies, and I've been on You know, on the professional side of the industry, you know, I've sat on big trading floors, you know, with like 150, um, traders. And even on the professional side, um, you know, certainly on the prop trading side, um, you know, most fail even though you're set up with professional systems, you've got professional risk managers monitoring you. Um, even in that environment, you obviously provided some training. I mean, back in the day when I started, that training was very limited, but, but at least you got some guidance and you had some experienced traders in the room that you could kind of bounce ideas off and stuff. But even in that environment, actually, most people didn't make it. And, and so if you don't have all of that support and you're kind of trying this on your own, if you're on the retail side of the industry and you're you know, therefore most likely sat at home on your own trading, then of course the odds are even more stacked against you. And there's definitely one common theme— every single person that fails, there's one big common theme, and that is they can't manage risk. And that is not, um, it's not necessarily their own fault they can't manage risk, because It's just the fact they're human beings that they can't manage risk. And I think if you haven't had any training in stuff like the psychology of decision-making under pressure, if you haven't had any training around decision-making and, and how that decision-making process changes depending on your emotional state, so depending on whether you're, you're in a trade that's losing money or if you're in a trade that's making money, Anthony Cheung, actually your decision-making can be the exact opposite. The problem is we don't realize it because it's all driven by our kind of emotional subconscious. So most people fail because they can't manage risk. Most people fail because they've got no consistency in their performance. And so, you know, I would definitely say you've got to become, you know, dedicate yourself to understanding the importance of discipline when it comes to managing risk. The thing is, us human beings, unfortunately, often, because risk management is like rule setting and then it's sticking to the rules. And unfortunately, us humans, we don't really like rules much. And rules are there to be broken, right? Well, so, you know, it's kind of one thing to set rules for yourself because, you know, and you set these rules when you're not in a trade. So you kind of sit at the start of the day and you go, right, or the start of the week or the start of the month or the start of the year, and you go, right, Okay, here are my rules, here are my risk rules, right? I'm going to give myself, I don't know, a daily loss limit, or I'm going to give myself a loss limit on any one trade, or— and these are rules you're setting for yourself, right? That's fine, crucial that you do that. Unfortunately, most human beings then go break those rules, and that's why you might set the rules in place but in the end you still fall over. So it's about the discipline of implementing those rules. And the problem is often we need a really negative personal experience that was very painful. So let's say we break a rule and we lose a lot of money. Well, right, that is now an event that's in our brain. That is a painful moment. And when it comes to the following day, the following week, the following month, whatever, and you're, you're down to your stop loss limit for the day, and you're thinking, right, shall I continue trading? I'm sure I can make this back. If I could just get back to break even, then I'll stop. You know, if those thoughts start going through your brain, you'll know that that's irrational, emotional. And you'll know that you need to stop, book the loss, turn your computer off, go away. You know you need to do that and you'll do it because you can draw on the negative experience of the pain of what happened when you broke that rule. So unfortunately for us humans, you often need to set the rules, yes, but that's the easy part. It's actually sticking to them where— that's where people make it or don't. So that's what I would say.

Cool, thank you very much, Piers. Quite a few comments here about your red t-shirt.

Yeah, well, it's actually— I mean, Some people don't confuse that for Arsenal, by the way. It's Amplify. Amplify.

Yeah.

All right.

Just to wrap things up then, because we've now hit our finish time. So just quickly, for anyone who is new to Amplify and isn't already doing so, I'm pleased to say at this point we continue to put out a kind of regular content which is freely available, and, and hopefully it serves as a good piece of education. And there's a variety of different content, so just search for Amplify Trading on YouTube, hit the subscribe button. If you click that bell icon, you'll get notified whenever we post something. I post daily content on a macro fundamental outlook. Sam does a weekly technical look ahead for the week. It's particularly useful for anyone who's working full-time perhaps and just wants to know the bigger levels and picture. Eddie does a great series of videos where he explains kind of quite a lot of the popular topics. So he did a— he actually— someone asked a question about Wirecard, he did a video about that, and it's got 50,000 views, for example. So he's got some really great insight into some of these things. He did one the other yesterday about TikTok. And also, you heard it here first, one of the tech team Milan is going to be dropping some, uh, tech-related videos on the channel. So for anyone who's interested in algorithmic trading, what is it, you know, dispelling, dispelling some of the myths around, say, these types of concepts, he's also going to be adding some content as well. So hit subscribe, follow us on YouTube, leave a comment on the videos. The guys and I will always respond. Other ways and means that are quite useful, if you use Twitter for following news and information Um, every morning I tweet out only the most important articles from Bloomberg and Reuters, and I do that at 6 AM in the morning every morning. So that can be an easy way to just get accessible information that's very useful for trading. And obviously you can look me up, you can look Sam up, the other guys, we're all on Twitter. Feel free to follow us. You can always reach out to us on there as well. But hopefully the session was useful. For any of the pilots that joined us, um, thank you for joining. Um, if you didn't make our final 5 selection, uh, I hope that our paths do cross. And obviously, if we can help in any way, please do get in contact. But that goes out to everyone who's joined us tonight. Um, so yeah, other than that, thank you very much, guys, for giving up your time. Sam, Alex, Piers, Liam, always a pleasure.