Trade Idea Generation Process

A framework for generating trade ideas.

Generating Ideas

Last time, I wrote a rather long post on how I conduct analysis on a chart. If you missed it, you can read it here.

Ok so once you’ve done all your analysis, what next? Now you need to come up with a trade idea or two. We all have a tendency to rush this part… The urge to grab onto the first trade idea that comes to mind is strongThere’s a better way to leverage your screen time and skill.

The mental model I like to use is this:

  1. Where do I think the price is headed today?
  • Higher, lower, range-bound?
  • Do I need more info to make a decision? Like waiting for the first hour?
  • Heck, do I even have a good read? (This is where the higher TF work comes in, maybe there’s no decent pattern, and that’s okay. No trade is an active decision.)
  1. Next, I want to revisit the key levels I extracted from my analysis.
  • How do they fit into the expected range of the day?
  • Would they be a good place to consider doing business?
  • Or would they be a better trade target?
  1. Then, what would I like to see at that level?
  • Reversal pattern?
  • Wick through that fails?

Anything else to consider like time of day? You’re following a flow chart from a naked unbiased chart to trade idea generation. With each step playing a key role.

DAX Index Example

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I assess the daily and the last few day’s trading conditions.

Get my key levels and look at the prior day as a final clue to determine
my plan for the current/next day.

Prior day

These are my key levels, and I come up with two decent trade ideas.

(Then detail on trigger method, stops, target, position size etc.)

Idea 2 turned out to be a non-starter but Idea 1 played out ok.


Final point.

If I start missing trades or messing up for whatever reason I can work on my trigger process.

If my levels aren’t working or I’m misreading the conditions I can work on my analysis.

Isolating weak spots is a quicker way to get back in tune rather than overhauling the whole engine.

That’s why I think a clear multi-step process to trade idea generation is a great method.

Try it, and see if it helps your trading.