Trading Plan Template

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Old Jan 21, 2006, 12:50am   #25
Joined Mar 2005
I'm interested in the way this thread is.

Great detail and even papers on a "Trading Template".
Developing one is fine but one question.

How do you know that once developed and placed into practice it will be profitable?
Worse still having traded it for a few weeks/months and then finding its not profitable.

I'm not seeing any discussion on WHAT makes a Trading Plan profitable.

Unless you know WHAT there is little cahnce in answering WHY and HOW a Trading Template should be designed.

If anyone had one that was longterm consistantly profitable these questions would be answered and discussion would be less on the "mechanics" of a template and more on the OUTCOME.

There are only 3 ways to increase profitability anyone hazzard a guess?

Tims work is excellent but I'm sure I can put my finger on why he is yet to have consistant profit.

Last edited by tech/a; Jan 21, 2006 at 12:58am.
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Old Jan 21, 2006, 1:25am   #26
 
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Quote:
Originally Posted by tech/a
I'm interested in the way this thread is.

Great detail and even papers on a "Trading Template".
Developing one is fine but one question.

How do you know that once developed and placed into practice it will be profitable?
Worse still having traded it for a few weeks/months and then finding its not profitable.

I'm not seeing any discussion on WHAT makes a Trading Plan profitable.

Unless you know WHAT there is little cahnce in answering WHY and HOW a Trading Template should be designed.

If anyone had one that was longterm consistantly profitable these questions would be answered and discussion would be less on the "mechanics" of a template and more on the OUTCOME.

There are only 3 ways to increase profitability anyone hazzard a guess?

Tims work is excellent but I'm sure I can put my finger on why he is yet to have consistant profit.
The template asks you to define your setups - the reasons you enter, and exit, and to state the risk/reward and sharpe ratio for each of these. I don't see how you can state the r/r or sharpe ratio if you haven't defined a setup (including back and forward testing in real time).

If your real trading outcome differs from your forward testing, then it's likely that your setup definitions are inadequate (you don't recognize them in real time), or you are not following your plan(because you don't really believe it).

I suspect there is a little bit of a catch-22 involved. People who can sit down and knock out a trading plan may already be successful and probably don't need to do it. Those of us who are still working on it are missing pieces of knowlege that has become second nature to those who are consistently successful.

For me, the value of the template continues to be it's ability to point out the gaps in my knowlege.

JO
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Old Jan 21, 2006, 3:03am   #27
 
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If you were starting a business, I fear if you have no _written_ business plan. Not only would you fail to raise capital, but chances are your business would fail. Trading is the same thing. A plan defines the way you handle your trading. What you do in certain situations, how you go about daily, monthly, operations. Setting goals. You don't necessarily have to have a plan to do all of these things, but having a reference like this will help you spot and avoid potential problems before you experience them.

Quote:
Originally Posted by JumpOff
For me, the value of the template continues to be it's ability to point out the gaps in my knowlege.

JO
Exactly. Having a plan does not necessarily mean you will succeed. However, I would venture to say that your chances of success WITH a plan such as the one Tim made would be better than if you didn't have a plan.

Not only does this plan force you to think about things you might otherwise not think of until you experience a long drawdown (what will you do in the event that you experience drawdown? How much do you ACTUALLY plan on risking per trade? How much exposure will your portfolio have?, etc) Like mentioned above, most seasoned traders have at one point or another thought of all of the questions and come up with answers for those in the plan, but for those who are new to this or who are looking for some guidance this is a great reference. 10/10 in my book.
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Old Jan 21, 2006, 6:19am   #28
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Quote:
Having a plan does not necessarily mean you will succeed. However, I would venture to say that your chances of success WITH a plan such as the one Tim made would be better than if you didn't have a plan
Part "A" Very true.
Part "B" I disagree strongly an untested Plan has no more chance of success than no plan.

There is an important Missing Link.

Doesnt it then make sence that before you trade any plan you make every effort to test that that plan will be profitable.In otherwords you backtest it so that you can define constituents like.

(1) Initial Drawdown
(2) Maximum run of losses.
(3) Best stop loss positioning.
(4) Parcel size allocating relative to Capital.
(5) Expectancy of return on every $$ invested.
(6) Reward to Risk Ratio (This cannot possibly be defined without rigorous testing )It is not sufficient to have a setup which if it plays out would have a positive result! as Tim explains.
(7) Peak to Valley Drawdown.
(8) % Profit

There are many other "Numbers" however the above will determine consistant profitability.And Risk to Ruin,a statistic no one should trade without!
To be as well placed as possible your "Plan" should be Montecarlo tested.
Simply this is like giving 10000 people your trading plan and your initial capital and asking them to go off and trade your plan,then report back with detailed results in X Years.

Yes you need a testing capability and these days we have serious testing software available at very reasonable pricing.
Tradestation (Best for Futures)
Amibroker
Metastock/Tradesim combination (I use this)
Wealthlab
To name a few.

I'm not berating nor deminishing the fantastic effort and the enormous amount of time Tim has devoted to his work,its one of the best I have seen.
However as Tim says he is still to find a longterm consistantly profitable way to trade.
I'm suggesting that this is likely to be the missing link! (The Numbers)

With them you have a blueprints of parameters of success,your plan maps the
path and your Numbers tell you if your on the CORRECT path.
If your tested numbers tell you your longest string of losses in a row is 6 and you now have 10 even while your trading your plan,then----?
If your initial drawdown was 8% over 10000 tests and its now 12%---then?

Anyone can trade a number of winners but very few can trade consistantly profitably and Consistancy is where confidence and longterm profitability lie.

Ponder this.
To launch a shuttle you have a "Plan"
To stop the Launch or diagnose in flight problems you ahave a "Blueprint" of what is expected,anything out of this "expectancy" and alarms go off.If your not quick enough --disaster.
No blueprint---nothing to correlate to for an alarm.

So I'll just add another dimension to Tim's already fantastic effort.

"The Numbers Blueprint".

The missing link.
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Old Jan 21, 2006, 8:24pm   #29
Joined Jun 2005
Quote:
Originally Posted by tech/a
I'm interested in the way this thread is.

Great detail and even papers on a "Trading Template".
Developing one is fine but one question.

How do you know that once developed and placed into practice it will be profitable?
Worse still having traded it for a few weeks/months and then finding its not profitable.

I'm not seeing any discussion on WHAT makes a Trading Plan profitable.

Unless you know WHAT there is little cahnce in answering WHY and HOW a Trading Template should be designed.

If anyone had one that was longterm consistantly profitable these questions would be answered and discussion would be less on the "mechanics" of a template and more on the OUTCOME.

There are only 3 ways to increase profitability anyone hazzard a guess?

Tims work is excellent but I'm sure I can put my finger on why he is yet to have consistant profit.

there is a tight rope from you on 1 side of the grand canyon and the other. on the other side of the rope/canyon is a big pot of gold.

anyone can tell you how to walk across, some even tell you how to develop a plan on how to walk across.

yet few people can actually walk across. why?

keep planning. it wont help you find your guts though!!

if you dont want to walk across, you wont walk across - no matter how much you imagine how much better life will be on the other side. truth is, life isnt that different on the other side. your brain knows this, but you dont.


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Old Jan 21, 2006, 8:30pm   #30
Joined Jun 2005
so....

why do you want to cross?

a plan could help, but if you dont have the real motivation and need, a plan wont help.

if you do have the motivation and need, a plan will help, but it isnt the determining factor.

dont slip on that rope!!
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Old Jan 22, 2006, 11:42am   #31
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Quote:
Originally Posted by dbphoenix
Yes, I have a well-structured plan and it helps my trading.
--Db

Good to see that you're still around dbp - you've been keeping a very low profile of late.

"As for Tim's work, he has yet, unfortunately, to open a journal." I'm sorry to disappoint on this front but, until I have a better idea of what I'm about and where I'm going trading wise, I fear that a journal would be counter productive. This is because it would lack two of the things that it is supposed to achieve: focus and direction.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

On a general note. . .
Thanks for the feedback one and all. While I'm a sucker for praise, I also welcome the constructive criticism, as this is the only way the template can be improved. However, when this will be, I really can't say. Perhaps when I'm casually, fearlessly, strolling across the tightrope - to borrow charliechan's delightfully visual analogy - will be an appropriate time to revise and update it. So folks, don't hold your breath!
Tim.
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Old Jan 22, 2006, 4:40pm   #32
Joined Oct 2005
Quote:
if you do have the motivation and need, a plan will help, but it isnt the determining factor.
What do you consider to be the most predominant determining factor Charlie ?

Is there one factor for you that stands out above all else ?
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