Trading Plan Template

This is a discussion on Trading Plan Template within the Educational Resources forums, part of the Commercial category; I have an uncle who trades very simply and his trading plan on an EOD basis goes something like this. ...

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Old Apr 30, 2005, 7:17pm   #9
 
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I have an uncle who trades very simply and his trading plan on an EOD basis goes something like this.

He watches Bloomberg or CNBC for the first and last hours everyday and is only interested in two things. Are the shares or index he is trading going up ( or down) and what is the probability that the trend is continued. Quite literally he has mental notes of where support or resistance and what the current trend is doing from headline news.

This seems very simplistic but he developed his style in the days before the good old computer, indicators, charting software and fibs etc.

But then who is to say this is wrong after some 25 years trading he is now a multi millionaire. The one thing he always says is "set a stop in the market....There is no such thing as a mental stop"
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Old May 11, 2005, 8:20pm   #10
 
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I have a question, by not exposing more than 5% of your account you mean that if I have a 100k$ account I can have like 5 positions of 1k$ each? that wouldnt move the account anywhere.. I'm serious I dont know what you mean, I've read "come into my trading room" and its says there the same thing, not exposing your account to more than 6%(almost the same), did I get it wrong or do people earn money by only having 6% total of their account exposed(which means that even if they have an imaginary 100% profit of that 6%, their account move only 6% a month).... so how come they get 20% a month avg? thanks for any further answer
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Old May 11, 2005, 10:48pm   #11
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Using your numbers of 5% risk on a $100k account over 5 positions makes $1000 risk per trade. Divide $1000 by the dollar value from entry to your stop. If you see your setup trigger at $100 in a stock and it dictates that you place a stop $2 under your entry point, buy 500 shares and set a tight stop. You are risking $2 x 500 = $1000 = 1% of your account.

Intraday in a liquid market this works great. If youíre holding over night itís a different story. The unfriendly gap down may have you out much more than the $1000 you wanted to risk.

How much money you make depends on your target, and success rate and the frequency that your trade appears.

Account size and percentage returns can be misleading. You can have $5K in an account and trade the 1 contract of NQ (~$1500 intraday marginÖ I think ). If youíre properly backtested setup appears approximately once or twice a day, your stop is 3 points, your target is 6 points and you have a 50/50 success rate, chances are youíre going to be a happy camper if you execute your strategy properly. Since every point is $20 you are risking $60 (1.2 % of a $5K account). So for easy math, if a 20 trading day month is perfectly split up into winning days and losing days which each had 1 trigger a day, you have $ 600 in losses and $1200 in profits for $600 gross of commissions. That means that a +12% month risking 1.2 % at a time.

I know that my verbal diarrhea can go on especially when one throws in the gaps that can occur in thin issues, holding overnight etc. so Iím going to stop now. Iím not even going to bother proofreading because Iím too lazy so feel free to poke holes in my thinking and Iíll try to patch it up later.

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Originally Posted by Tomerep
I have a question, by not exposing more than 5% of your account you mean that if I have a 100k$ account I can have like 5 positions of 1k$ each? that wouldnt move the account anywhere.. I'm serious I dont know what you mean, I've read "come into my trading room" and its says there the same thing, not exposing your account to more than 6%(almost the same), did I get it wrong or do people earn money by only having 6% total of their account exposed(which means that even if they have an imaginary 100% profit of that 6%, their account move only 6% a month).... so how come they get 20% a month avg? thanks for any further answer
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Old May 11, 2005, 11:47pm   #12
 
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Leverage dear boy, leverage.

Example, if you have a USD100k, you might do a trade whereby you limit your risk to lose 1% or 2%, or (hopefully) make 3 to 6%

Using leverage offered by any trading platform, say 100 to 1, a risk tolerance of 2% and a stop loss of say 50 pips, you would sell(buy) EUR 400,000. If you get stopped out you lose 2k, if you took a 200 pip profit, you make USD8k

So your return on available capital (100k) is either a loss of 2% or a gain of 8%

I find the most important determinant for trade size, once you've calc'ed your risk amount, is how wide is your stop going to be, as this will determine the size of the trade. In the above example, if you think you can run a very tight stop, say 25 pips, then your trade size can be 800k. If you want a wider stop, say 100 pips, then only do a 200k trade. In any of these cases, you stand to lose only the 2% you are prepared to risk, i.e 2k

This method is sometimes called 'fixed fractional method'. Google for it maybe

Hope this is helpful
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Old May 11, 2005, 11:49pm   #13
 
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Sorry chaps, didn't see there was already a reply, but hope my response is helpful from an FX perspective anyway

Cheers
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Old May 30, 2005, 3:32am   #14
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hello Tim and everybody,

I appreciate everybodys` effort and especially Tim`s to put the Trading Plan Template together.
I actually emailed it to my brothers and hopefully they do something with it.

anyway to flesh out the trading plan template, wouldnt it be a good idea to go over it point for point
and let everybody have a chance to put their views across.
what about starting with point 5: know yourself, know your purpose
leave it open for discussion for a certain time ( 1 week - 1 month whatever) or to give late comers
a chance to have a different thread for every point of the plan.

any takers?

have a primo day
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Old May 30, 2005, 4:10pm   #15
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Hi vetten,
Thanks for your kind comments.

I suspect that your idea of dissecting the template point by point will not appeal to many people, if any at all! This is because producing a trading plan is a very personal thing. While everyone wants to make money, the motivations to do this via the vehicle of trading will vary from person to person. None of us are the same, therefore the questions posed in 'Know Yourself, Know Your Purpose' will produce different answers from each of us. If people were to do as you suggest, they would effectively be publishing their trading plans on a public forum, and very few people will be willing to do that.

If something isn't clear to you, or if you think something is just plain wrong or an important point has been omitted - then please voice your concerns. That way, the template can be updated and improved for the benefit of everyone who uses it.
Cheers,
Tim.
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Old Sep 3, 2005, 10:28am   #16
 
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I think the template being so long might no attract all traders, but it certainly a good thing, trading plan is not something you can plan over night, it needs time to evolve, and persuing your plan correctly can improve your chances to be a profitable trader.
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