A business plan involves a "feasability study" in the traditional sense...nothing to do with Mr. Van Tharpe...(or Doctor...) I was attempting to be funny for some Academic's... If you have an edge..maybe you can be in the minority of consistently, profitable, traders...
Can someone post a practical example how business/trading plan helped to improve a trade that went against you ? TIA
Simple.....if you have SPECIFIC rules in your trading plan to exit all trades against you by 8 ticks (lets say emini s&p positions), then you have a plan as to what should happen once price is against you by 8 ticks. If you do not have a plan (written down and is followed) then every time you have a position against you by 8 ticks you will most like do something different every time. When you have developed a consistent and profitable method through backtesting and forward testing, it must then be put into a specific written plan of execution. If you try to trade your system without a specific plan that is followed, you are doomed to degrade the systems performance potential......written plans followed are a key part to successful endeavors in trading.
5pillars when you "can your plan" do you find the "living market" may force you to apply discretion? Michael B.
I have enough flexibility designed into my trading plan to optimize performance from my system testing (part of the written plan development after your system is a good as you think it can get). What you want to do is make your written plan have the flexibility within its design....then when trading live you have no room to play "amend the plan" from the hip. Your system should be strong enough to follow the written plan while trading live and not have to improvise on the fly.....that method is not going to build consistency. If you find that following your written plan for the system you trade is not operating profitably, then you need to go back and re-develop your system and then write a new plan according to your new system changes. Step 1 - Create a winning strategy. Step 2 - Write the specific plan to follow your tested strategy. Step 3 - EXECUTE your written plan!
ElectricSavant - (yes you could say that....hehe) Here is a specific example from last weeks trading. My market delta based ES trading written plan allows me to enter trades with a mechanical method I use over a 3 point zone. Just because that is in my plan (the flexibility I have IN my plan), I still have the flexibility to NOT use that whole 2 point zone for entries. If I get counter-signal indications right after I have already entered a trade, I have the ability in my plan to reverse the original position for B/E to + 1 pt profit as a defensive strategy. Friday I was SHORT from 1406.00......... http://www.charthub.com/images/2006/11/24/ES_317_VB_6.png I could have allowed my mechanical entry method play this entry all the way to 1408.00 with additional positions, and then a hard stop at 1409.00 (this is in my written plan). I decided though once in this trade with new evidence, to reverse the position defensively (reduce loss) for B/E or up to + 1 pt max (this is in my written plan).......... http://www.charthub.com/images/2006/11/24/ES_317_VB_7.png In the end on this trade I made 3 ticks by going defensive and then waiting for a better SHORT set-up later (maybe after the gap fill....LOL). I lost 1 tick on the reverse and made 4 ticks after the reverse to my "get flat" profit target....trade netted 3 ticks. Later on with a new SHORT set-up I took a new SHORT trade (after the gap fill...LOL)........ http://www.charthub.com/images/2006/11/24/ES_317_VB_10.png http://www.charthub.com/images/2006/11/24/ES_317_VB_11.png All these actions were strictly within my written trading plan.....this makes a big difference imo.
Your progressive set of rules, with built-in buffers is intriguing to say the least...you even have a "reverse" built in, in case you are wrong with all the necessary safeguards... you are a discretionary trader, by the way...
Yes I agree that I am a "discretionary" trader within a set of risk-management guidelines (that is what the written plan is for).