Getting StartedMoney ManagementPsychology

Trading Plan Template

In order to succeed as a professional trader, it is often said that the aspirant must treat trading “like a business”. As with many of the clichéd phrases that litter the metaphorical trading floor, the importance of this statement is often overlooked, or the meaning misunderstood.

The following article by Tim Wilcox aims to address these problems by examining some of the ways in which a trader might go about achieving this vital goal.

It is divided into two sections: a general overview of what constitutes a trading plan and why it is prudent to have one, followed by a detailed analysis of the various aspects that should be considered during its creation, for example, the importance of self-awareness, discipline and risk management. Though the article is aimed principally at novices, traders of all standards are likely to find something useful within its pages.

Since the “Trading Plan Template” is considerably longer than our other articles, we have provided it as a pdf document, both for convenience and to preserve the original layout. Please click the link below to download it.

Trading_Plan_Template

Like many aspiring traders, Tim Wilcox entered the trading world knowing nothing about it. Nonetheless, he was convinced that it was the fast track to wealth and that he could do it. This wasn’t just his gut feeling, it was endorsed by the ad’ in his local Exchange & Mart which read, ”. . . some (people) have just made up to £32,500 in 28 days, and so could you”. Excited, he paid several hundred pounds for a large binder which, supposedly, contained everything he needed to know to trade options. That was back in late 1998. Surprise surprise, Tim never traded a single contract and quickly came to the conclusion that perhaps he’d been a tad hasty in his conviction that trading was the easy option – forgive the pun.After a fallow period of a few years and a handful more courses, the penny finally dropped in early 2002. He realised that the market gobbles up amateurs like him and spits them out again before breakfast! To stand even a slim chance of survival in this game, he had to treat trading as a business. This means he had to acquire the appropriate tools and learn the necessary skills.Tim focussed on the U.S. equities markets and, in early 2003, he enjoyed some success. He grew his account by 26% over a 3 month period – day trading the evening session via a spread betting platform - whilst working as a landscape gardener by day. This led to overconfidence which - in turn - led to an inevitable 'blow up'. Tim made the classic error of letting a day trade gone wrong turn into a swing trade which then went catastrophically wrong - losing 70% of his account on one stock. (For the record, it was ERTS.)Time to go back to the drawing board with a particular emphasis on risk management! Tim became very aware of the fact that books, magazine articles and message boards etc. all seemed to be singing from the same song sheet on the subject of trading plans. Quite simply, you’ve gotta have one! However, he couldn’t find anyone or anything that explained in any real detail how to go about writing one. The ‘Trading Plan Template’ is the result of this quest.From then on, Tim continued to trade U.S. equities markets right up until the 2008 financial crisis. At the end of that year as a full time day trader, Tim was struggling to make a consistent profit. However, unlike his earlier blow up, he had utilised sound risk management principles which ensured that his account remained intact, enabling him to fight another day. For most of 2009, he took a complete break from trading. In autumn that year, he joined the T2W staff as Content Manager and returned to trading with renewed vigour, and started trading U.S. index futures in 2010. 

Like many aspiring traders, Tim Wilcox entered the trading world knowing nothing about it. Nonetheless, he was convinced that it was the fast track to...

Mr. Charts

Legendary member
7,364 1,181
Brilliant
A priceless piece of work for every trader from beginner to advanced experienced.
Richard
 

dbphoenix

Legendary member
6,952 1,244
A very good start indeed. And you know what they say about a journey of a thousand miles . . . :)
 

JumpOff

1
702 14
kudos to timsk for providing the template.

I've been reviewing my journal and filling out the trading plan template provided by timsk. The latter is surprising difficult! It's one thing to have an idea in your mind, and another to write the details down on paper. I am still struggling with a few areas - but I can see that they will be completed as I work my way through another chapter or two of my journal.

The thing about aquiring a little bit knowledge, is that it allows you to better fathom all you do not yet know. Going through the exercise of starting a journal, and defining and testing a setup has given me a base of knowledge that I hope will propel me through the next stage.

Filling out the trading plan template has enabled me to reflect more accurately on why I want to trade, what I'm willing to do to make that happen, and to give a detailed expectation of my goals and behaviors. My attempts to complete the trading plan make it very clear "where the information gaps" are still located, and help to direct the next phase of journaling.

JO
 

neil

Legendary member
5,167 745
Well done JO. Nice to see someone making an effort to succeed which I am sure you will do in due course. Look forward to reading about your successes in future entries.
 

tech/a

Junior member
11 0
I personally cant fault the theory.Im where Tim would like to be,and can say that the adaptation of all rules(certaintly in my case) has lead to profit consistantly trading my style (Position trading stocks) over the last 3 yrs.I'm not a fulltime trader and dont wish or have to be.

Tim I have a question.With faultless theory why then are you not profitable?What are the reasons do you think?

Finally something to offer those here.(As Tim asked for some examples in the artical he wrote---(its suprising who maybe reading!)).
My trading methodology is available free to the public and has been/is being traded live(The ASX-------BT Bankers trust Margin list of stocks.) on an Australian Forum---Reefcap.----and is nicely profitable--- well I think it is!
The host is currently undertaking an extensive forum upgrade and will be off line for around 2 weeks I believe.When back I will direct all to the links showing the method---and the results.
Really all of your theory in living practice------well for 3 yrs anyway!
The initial $30,000 starting capital is around $170,000,as of last friday

The method was designed using Metastock and Tradesim and is a long term portfolio based long method.While I have been in the market for the last 3 yrs there are times (Being a long method) that my method wont be---but not yet!.

My apologies that I cannot direct you to the site yet.
 
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timsk

Legendary member
7,085 1,870
Thank you folks for your kind words - both here and on the original thread. However, I am really just a compiler of other peoples ideas. Everything in the template either comes from members posts on these boards or from web sites via the links posted on the original thread. I pondered at length as to whether or not to credit individual traders whose comments, help and advice were especially useful. In the end, I decided against this as some of them don't post on T2W, some are very well known but (sadly) not universally admired and some are just off the cuff comments from humble folk like myself! Anyway, you all know who you are so, thank you once again for all your help; there's no way that I could have written the article without you. ;)

tech/a said:
Tim I have a question.With faultless theory why then are you not profitable?What are the reasons do you think?
tech/a,
As J.O. says in her post, completing the template isn't that easy! Also, I struggle to reconcile what I want (i.e. to be a day trader) with the reality of my situation (woefully under capitalised SB account and a full time job). My own advice in the template to people in my position is to swing trade or position trade. One of my weaknesses is a tendency to do what I want to do regardless of the consequences, rather than what common sense dictates that I ought to do. :eek:
Tim.
 

Mr. Charts

Legendary member
7,364 1,181
I think you are too modest, timsk.
I hope it is as beautiful a day on the Devon moors as here is sunny Surrey.
Richard
 

inxs

Newbie
4 2
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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Tomerep

Member
72 1
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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DTK

Newbie
8 1
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 you’re holding over night it’s 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 margin… I think ). If you’re 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 you’re 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 I’m going to stop now. I’m not even going to bother proofreading because I’m too lazy so feel free to poke holes in my thinking and I’ll try to patch it up later.

Tomerep said:
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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Dumpster

Newbie
6 1
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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Dumpster

Newbie
6 1
Sorry chaps, didn't see there was already a reply, but hope my response is helpful from an FX perspective anyway

Cheers
 

vetten

Member
78 4
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
 

timsk

Legendary member
7,085 1,870
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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