Trading Plan

Discussion in 'Trading' started by 40yotrader, Oct 22, 2002.

  1. I've been paper trading for 6 months and now I'm ready to complete a trading plan before putting my money to work. I've got sections for financial goals, measurements, capitalization, methods and tactics, backup strategies, money management, discipline controls, daily ritual, and dealing with emotions. I've also got a Trading Log, Trading Journal, and Trading Notebook. What other elements go into a trading plan? Does anybody have a link where I can see a example of a good trading plan?
  3. When I started with Auditrack I tried to trade based on what I saw. I gave up because I couldn't reliably make money. I put some money in the Tradestation brokerage to use their stuff. I liked it, but I wanted to do multiyear backtests. Bought 2000i on Ebay and built a 100% mechanical method to fit my goals. Past six months I've been getting into a routine and checking fills versus the plan. Since I'll need an income from trading by 2004, I'm highly motivated to follow my plan. Being 100% mechanical takes out the judgement, so I think that will help.
  4. What successful trader is helping you achieve your goals or at least make sure your going into the right direction based on your trading methodology you've put together so far?

    Also...another traders trading plan that the trader consider is good may be a horrible trading plan for you because your trading style is completely different and vice versa.

    Based on your post...seems like your covering the basics. The key is this...were you able to profitably execute your trading plan so far?

    Your ahead of most beginners (having a plan) because most beginner traders don't even do that.

    Even worst...many beginners will just trade without a trading plan in hopes they'll discover some sort'uv trading edge that puts the puzzle together.

    Once've been paper trading for 6 months...were you profitable enough to make a living if your paper results had been real money?

    What are you trading?

    If you were profitable on's time for you to start trading with a small capitol with real money.

    Here's something you can do...instead of wondering what's a good trading plan...

    tell somebody (preferably someone making a living at trading) the specifics of your trading plan and ask them for suggestions on improvements.

    Even it here for all to analyze and make suggestions.

    Those that reply with suggestions on improving your trading plan...ask them if their trading plan is making them profits (you don't want driving lessons from the blind).

    P.S. I'm a little tired and this post is not exactly where I want it to be in response to your question.

  5. I'm not a big fan of overly detailed plans. The markets are unpredictable. You have to retain flexibility. I do think it is a good idea to outline a daily routine, know your risk and money management parameters cold and have a system or method you intend to use. You apparently have all this down. You will never eliminate the risk from trading. Don't delude yourself into thinking a detailed plan will insulate you from risk or losses.

    For a newbie, the best plan is to start using only a fraction of your available money. Keep the rest in a separate account, not with the broker(s). Start off trading only one timeframe. Keep things simple and controllable. As you gain experience you will appreciate what is important and what is not. You can refine your plan.

    For your actual plan oneof the most important elements is knowing what economic releases are coming on that day.

  6. None personally...just books from other traders to get ideas.

    I'm just trying to make sure there isn't something I've forgotten before starting with real money. Nothing I'm doing is any big secret and I don't need to know anything about anyone's methods.

    My goal for 6 months of papertrading was to generate a profit of 75k. So far I've achieved over 95k with another week to go. It's feeling like a job, so I think I'm about ready to switch to real trading. I sold my house and moved to a apartment with my wife and kids to reduce our expenses. We only need 50k/year to get by. My plan calls for 150k/year in income, so even if I'm off by 50%, I should still make enough to get by and put a little in the bank.

    In my past career, I was a marketing strategist. I know a well developed plan is critical to success in business. I don't think trading is all that much different.

    Yes, so good.

    I decided to trade the Emini SP futures. I chose futures becasue of the tax advantage over equities. I chose the Emini becasue of good liquidity, good volatility, and I found through trial and error that I don't feel comfortable holding a position overnite.

    My accounts fully funded with 80% of it in Tbills. I'm planning on real trading beginning next month. I was just hoping to make sure that there wasn't something else I should be looking at before I begin.

    Good idea. When I've finished writing the pieces, I'll think about posting it. Maybe a couple of experienced traders will offer some good positive advice.
  7. Good suggestions....thanks.

    From a psych. point of view, I decided to go through the same routine I did to go to work, (shower, shave, get dressed, etc.).
    I setup one of our bedrooms as a office that I consider my new place of employment. I wear a suit and start after eating breakfast. I treat everything I do on the computer as my new work so that I never treat it as a hobby. Someday I might be able to roll out of bed and trade. Right now I need to feel like it's my new job.

    My plan calls for risking a maximum of 20% of my funds for the worst drawdown I can expect, so I'm not too concerned about losing. I'll be trading within limits right from the start. If I lose the 20%, then I'm done trading. Plan B is to buy a franchise for a couple of Subway shops and try to get by.

    My basic plan is very simple. Buy intraday breakouts with a trailing stop. If I lose, try again, repeat until end-of-day. So far my worst losing streak has been 3 days. I backtested the idea on 9 years of intraday data I found at I found that the max. losing streak was 12 losses in a row. After reading about Monte Carlo analysis I bought Prosizer to test the trades randomly. The worst losing streak went to 18. My 20% risk point assumes 26 losing trades in a row, so hopefully I'm going into this with my eyes open. If slippage is worse than modeled, then I'll need to make adjustments. I'm sure flexibility is very important.

    All this preparation is to improve my confidence before risking real money. Hopefully I'll be able to pull the trigger the same as with the paper trades after 10 losses in a row. I'm sure my nerves will be my biggest problem,....that's why I'm trading mechanically.

    Thanks again.
  8. Thank you for the link. I really like your cease trading ideas as a circuit breaker. I'm looking to see if I can use the idea for my trading. I think you're also right about real trading plans. I've seen talk of them in books and on forums, but yours is the first I've ever seen.

    I have my work in progress in a word format. Once it's complete, I can post it in a pdf for all to review. If nothing else, maybe it'll help someone else when they get started.

    Thank you very much.
  9. Atlantic



    AAA already mentioned the econ. reports. here are a few links were you can take notice of the specific times (choose the one you like best):

    if you are already papertrading - you might have noticed that the minis tend to do some weird things sometimes after those reports. staying out of the market at those times is one simple element of risk management - i would say.

    let me just add that some of the trader's greatest enemies are the need to trade and the need to make it back. at least if you start trading with real money you'll know these feelings. so please try to not set yourself under too much pressure - try to enjoy the game - i know it's damn hard.

    hope this helps - good luck to you.
    #10     Oct 23, 2002