The Development Stages

Table of Contents

• Taking Action
• The Development Stages
  • Stage 1 – Establish Your Foundation
  • Stage 2 – Simulator Environment
  • Stage 3 – Live Environment – Minimum Size
  • Stage 4 – Live Environment – Increasing Size
• As You Progress…
  • NOTE:

Taking Action

Our aim in this article is to put in place a process to follow as you progress from wherever you are right now, towards consistent profitability.

If you’re a novice, start at the beginning. If you’re experienced, start at the beginning as well, comforted by the fact that you’ll progress faster.

As with anything I present, feel free to adapt it to your own needs. Although I will caution you; there are no short-cuts in this game. Learning is a process. Cut out or amend steps at your own risk.

The Development Stages

We’ll start by defining several stages of development.

Development Stages

We establish our foundation; we learn to trade in a simulated environment; we learn to trade live with minimum size; and we learn to trade live with increasing size.

Each stage must be clearly defined, with targets to achieve prior to advancing to the next stage. Let’s do that now.

Stage 1 – Establish Your Foundation

Foundation Knowledge:

Read the eight volumes of YSTC Trading with Price Action Volume.

Setup:

• Choose your market and timeframe.
• Document your Trading Plan and Procedures Manual – Article 80 and 81.
• Establish your Logs and Journals – Article 89.
• Set up your Trading Platform – Article 79.

Study price action – market structure and setup areas:

1. Print historical charts (all three timeframes) for 100 trading sessions.
2. Take the charts for one session, and study price action with the benefit of hindsight perfection.
   • Where were the higher timeframe S/R levels? Mark them on the higher and trading timeframe charts, only to the point at which they become irrelevant. Then add new levels as they come into play.
   • Study the nature of price movement within the structure. Define the changes of trend. How did it trend? Is it moving with ease, or facing opposing order-flow throughout? What does this tell you about the bullish or bearish sentiment of market participants? What clues were provided that could have alerted you to the nature of price movement? Note any significant changes in structure, such as key breakout points, or areas of smooth price trend vs congestion. Look for clues that could have alerted you to the changing environment. Record observations on the charts. Record significant observations within your Lessons Learnt Journal.
   • Identify setup areas and mark them on the chart. How could you have identified these in advance? Where are the signs of strength and weakness leading into the area? How did price act within the area, to provide clues as to potential success or failure?
     • i) Study price interaction with S/R. What clues did price offer regarding potential test, breakout failure or breakout pullback opportunity? How could you have seen this in advance?
     • ii) Study pullbacks. What price action with volume led to a simple, single-swing pullback? What price action volume led to complex (multiple swing or extended duration) pullbacks?
   • Don’t worry about trades at this stage. Simply make observations of market structure, the nature of price movement and setup areas.
3. Place the charts in your market structure journal.
4. Repeat steps 2 and 3 for all 100 sessions.

Simulator practice – market structure and setup areas:

1. Trade a simulator (demo) TradingView platform with live or recorded market data.
2. Follow price action and volume throughout the session while carrying out your initial and ongoing analysis processes. Make notes within your trading log throughout the session. Print (or screen capture) charts if necessary to record price action at the time of your trading log observations.
3. Do NOT concern yourself with trade entry, management and exit. Just aim to follow price; maintaining your assessment of likely future trend direction and areas of trade opportunity.
4. Following each session, conduct your post-session review process in order to compare your actual performance with hindsight-perfect performance.
5. Print charts and make notes for your journals – lessons learnt and market structure.
6. Repeat for as long as necessary to feel comfortable with the process. I recommend no less than two weeks (10 sessions). Make use of market replay if time is available, in order to reinforce any lessons learnt and build your intuitive mental model of the markets and price action and volume.

Study price action – trade opportunity:

1. Return to your 100 session chart printouts.
2. Having become comfortable with identifying market structure and setup opportunities, you will now consider trade entry and management. Start with the printouts for the first session.
   • a) Review the previously identified setups.
   • b) How should you have traded these setup areas (in broad principle only)? Where was the ideal entry point? Consider the nature of price movement (smooth or choppy with much candle overlap, for example) – how could that have influenced your trade entry decision? How should you have managed the trade, with the benefit of hindsight? Should you have scratched? When should you have moved stops to breakeven, or beyond? Where was the ideal exit? What clues were provided with the price action to lead to this hindsight perfect trade?
3. Repeat step 2 for all sessions.
4. Return the charts to your Market Structure Journal for future study.

Simulator practice (market replay) – trade opportunity:

• For each of the previously recorded simulator sessions:
  • a) Replay market data with the intent of again conducting your initial and ongoing analysis, this time also trading each of the setups.
  • b) Following each setup, pause to review your attempts to trade it. Where did you correctly read the market sentiment and make correct trading decisions? Where should your decisions have been different? Record any lessons in your lessons learnt journal.

Target for Advancement to Stage 2:

1. Minimum 100 historical sessions reviewed in hindsight – market structure and setup areas.
2. Minimum 2 weeks simulator trading – market structure and setup areas – NO TRADES.
3. Minimum 100 historical sessions reviewed in hindsight – trade opportunity.
4. Minimum 2 weeks simulator trading (market replay) – trade opportunity

Yes, this will take at least a month! Or possibly a lot longer if you don’t have 100 sessions of historical data! You may wish to consider similar markets to make up the numbers, but I recommend at least 50 sessions from the actual markets you will trade.

Be patient. You will learn a lot during this process.

Stage 2 – Simulator Environment

Initial Benchmark:

1. Review the Pre, During and Post-Session Routines – Article 83, 84, 85.
2. Commence trading the strategy as if live, but within the safety of a simulator (demo) environment.
3. Carry out all daily routines for one week. Do not concern yourself with results, although all trading must be conducted in as professional a manner as possible. We are not playing here! This is serious business!
4. Record your trading stats. These set your initial benchmark. You will most likely not have achieved profitable results. Do not be concerned. This is merely your starting point.

Improvement:

1. Continue trading, aiming for gradual improvements through an effective review process.
2. Refer to the later section on Challenges and Difficulties, if necessary.
3. Repeat until achieving profitable results in each of four consecutive weeks.

Target for Advancement to Stage 3:

• Profitable results in each of four consecutive weeks, within the simulator (demo) environment.

Stage 3 – Live Environment – Minimum Size

Initial Benchmark:

1. Commence trading the strategy in a live market environment, with the minimum position size possible for each of your two part positions.
2. Carry out all daily routines for one week.
3. STOP TRADING if you lose 10% of your trading funds. Something is most likely NOT going right. Conduct a thorough review and return to the simulator environment. Note: You must be financially able to afford the loss of this 10% of your trading funds. If not, do not commence stage 3 until having saved a larger account balance. Alternatively, consider moving to a market that allows smaller accounts and smaller position sizes.
4. Record your trading stats. These set your initial benchmark. You will most likely not have achieved profitable results. Do not be concerned. This is merely your starting point.

Improvement:

1. Continue trading, aiming for gradual improvements through an effective review process.
2. Refer to the later section on Challenges and Difficulties, if necessary.
3. There is to be no consideration for increasing position size until achieving profitable results in each of four consecutive weeks. Size increase though is not compulsory. Remain at minimum size for as long as you need.

Target for Advancement to Stage 4:

• Profitable results in each of four consecutive weeks, within the live market environment, with minimum position size.

Stage 4 – Live Environment – Increasing Size

Proof of Ability:

1. Return to a simulated environment, trading the increased position size.
2. Carry out all daily routines for one week.
3. Do not transition to a live environment until demonstrating a profitable week. If you fail to achieve profitability, consider either returning to the previous size for additional time, or attempting a second week. If the second week is not profitable you must remain at the original size. You may only progress to the live environment if the combined fortnight is profitable.

Trading Increased Size:

1. Continue trading, aiming for gradual improvements through an effective review process.
2. Refer to the later articles on Challenges and Difficulties, if necessary.
3. There is to be no consideration for further increases of position size until achieving profitable results in each of four consecutive weeks at each size level. Size increase though is not compulsory. Remain at the current size for as long as you need.

Target for Further Size Increases:

• Profitable results in each of four consecutive weeks, within the live market environment, with the current position size.

As You Progress…

NOTE:

1. All size increases must involve a gradual increase, not a large jump. There is no hurry. The number one priority is to ensure survival at each level, prior to advancing to larger size.
2. Throughout this development plan I have referred to trading for a week. Obviously different weeks will have different numbers of trades. The intent is that each week provides a minimum of 20 trades. If your week does not provide this, carry this week over to include the next. That is, group the trades from the fortnight and consider that as a single week, for the purposes of our development plan.