Trading Plan 101

[captjoe 10]

I'm currently revising my trading plan. I would like to hear from more experienced traders in developing a plan. What elements to include, what has the priority, what risk to assume etc.

[Minis Trader 10]

This is by no means all inclusive but whenever I work with a new trader this is what I give them to get started with for their plan:

 

Questions To Ask Yourself

1. Why do I trade?

 

2. What do I trade? What do I prefer trading? What am I most comfortable with? (stocks, futures, options)

 

3. What time frame do I prefer to trade in? (day, swing, intermediate-term, etc.)

 

4. What position size do I trade? (Is it too large or too small) (What percent of my total account am I trading)

 

5. How many positions at once am I comfortable trading?

 

6. What overall market conditions must be met for me to trade? (What conditions do I avoid)

 

7. What are my trade entry signals? Am I using them effectively? Do I use a combination of signals?

•Market Conditions, specific patterns, Technical Indicators

 

8. When do I get out of a winning position?

•What are my rules? Do I have any?

 

9. When do I get out of losing positions?

•Do I always use protective stops?

•What are my rules? (Percentage, set dollar amount, support/resistance levels, volatility-based, technical indicators, fear)

 

10. What do I do when I have a losing streak?

•How do I define a losing streak?

 

11. What specific money-management tools do I use?

•How much do I risk on each trade?

•If I were stopped out of all my positions at once, what would the result be?

 

12. Do I trade both long and short?

•Do I need to?

•Am I comfortable with going short?

•What is my experience trading on the short side?

 

13. How do I trade the open? Or do I? Should I?

•What is my gap-up strategy?

•What is my gap-down strategy?

 

14. How do I create my watch list?

•How can I improve it?

•How often do I update it?

 

15. What is my trading style? What traders do I follow?

 

16. What do traders that I admire do that I don’t do?

 

17. How much time do I spend daily outside market hours doing research/homework?

•What is my routine, Do I have a routine?

•How much better would my trading be if I were more disciplined about this?

•What specifically needs to be done?

 

18. What is my annual income goal?

•Break it down to daily/weekly goals (i.e. $250,000 = $1000/day or $5000/week)

•What do I need to do to achieve this goal?

 

The next two questions are designed for newer traders:

19. How much money will I start out with?

•What percent of my net worth does this represent?

 

20. When do I plan on becoming profitable? (if not already)

•How long will my “paper trading” period last?

 

 

When this exercise is complete, you’ll have two things:

1.A better understanding about yourself, and your trading

2. The basis for your Written Trading Plan.

 

Writing your trading plan:

1. Goals

•long-term, short-term, daily

•make them specific and realistic

 

2. Tasks

•what do you need to do to get there?

 

3. Trading Rules

•you’ll use these daily

•make these very specific

 

Once your plan is written, it’s important to review it on a regular basis. This is done for a number of reasons:

--to track profitability

 

--to track how closely you are following your trading rules

 

--to identify areas that need improvement.

 

--to modify it as needed (At least once a year)

[james_gsx 16]

A huge portion of my plan is focused on risk. I'm an ultra conservative trader that would probably drive most people here nuts. But it only takes one black swan to wipe a trader out for good. Bootstrap had a great thread here:

 

http://www.traderslaboratory.com/forums/f30/a-different-approach-4609.html

 

Other than that, keep it simple. Remember that your goal isn't to be the next uber millionaire on Traders magazine, but to live to fight another day.

[Head2k 10]

I am a beginner and I don't have my own plan yet, but once I downloaded a template. I believe I found it here on TL, just can't remember the thread. So I am uploading it again, maybe it could help.

Trading Plan Template.pdf