A Trading Plan - You MUST Have One!

timsk

Well-known member
Mar 18, 2002
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#1
On the 'General Trading Chat' forum there is a thread started by sun123 entitled 'Lost Trading'. In it, dbphoenix stressed the importance of having a trading plan. A quick search doesn't throw up any threads devoted to this important topic, so I thought I'd start one. (If it is covered elsewhere, apologies - and could someone please post a link).

dbphoenix' post on the above mentioned thread reads:
. . ."I rarely find beginners who have trading plans. And by "trading plan", I mean something that's detailed, specific, tested, and profitable. Instead, they have what is at best a collection of ideas that seem good and which they try out, often with real money, in order to see what happens. This is not a plan.
Anyone who trades with a plan is leagues ahead of those who don't, which is nearly everybody. I suppose no one bothers with it because it's work. But plan beats no plan every time".

So, the objective of the thread is to provide a template by which all traders - regardless of instruments traded, time frames, brokers etc. - can create a professional trading plan which can form the very bedrock of their trading business. Contributions from any traders who have a 'detailed, specific, tested, and profitable' trading plan would, IMO, be a huge help to those of us who haven't!
:)
Tim.
 
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timsk

Well-known member
Mar 18, 2002
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#4
Bracke - :cheesy:
Cheers alliance, title now edited!
Correction, I can edit the post, but not the thread title. Mod's, - can you do this for me please as it does look rather silly!
Cheers,
Tim.
 
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bracke

Well-known member
Dec 12, 2003
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#6
timsk

I suggest that you do not let the mickey taking posters get to you. Just remain deadpan.

Regards

bracke
 

sulong

Active member
Sep 12, 2003
249
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Portland OR. USA
#8
I can only speak from my own experience, so here goes.
I think the first step to creating a trading plan, is to "adopt" a few truths on faith.
1. A trading plan will make the act of trading simpler, than trading with out one.
2. A trading plan will limit our opportunity to make bad trades.
3. A trading plan will not allow most psychological issues to take root.
( I'm sure there are others, but it's early sunday morning, soo..)

The second step.
You have to choose, and stick to those choices.
Where is the best place for your setup to present itself?, can you spot that place before the price gets there? If you can, then "choose" only that place for possible entry's.

Choose only a limited number of setups. (1 or 2) (Don't worry, you'll discover the principals at work with those 1 or 2, and Begin to see those principals at work over and over)

Choose your goals.
How many trades do you want to make in a day, a week, a month?
Choose how you want to measure success. By your own behavior? by the amount of money you won/lost?, by win/lost %?

I have to go now, the kids awake. :)
 

sulong

Active member
Sep 12, 2003
249
14
28
Portland OR. USA
#9
sulong said:
I can only speak from my own experience, so here goes.
I think the first step to creating a trading plan, is to "adopt" a few truths on faith.
1. A trading plan will make the act of trading simpler, than trading with out one.
2. A trading plan will limit our opportunity to make bad trades.
3. A trading plan will not allow most psychological issues to take root.
( I'm sure there are others, but it's early sunday morning, soo..)

The second step.
You have to choose, and stick to those choices.
Where is the best place for your setup to present itself?, can you spot that place before the price gets there? If you can, then "choose" only that place for possible entry's.

Choose only a limited number of setups. (1 or 2) (Don't worry, you'll discover the principals at work with those 1 or 2, and Begin to see those principals at work over and over)

Choose your goals.
How many trades do you want to make in a day, a week, a month?
Choose how you want to measure success. By your own behavior? by the amount of money you won/lost?, by win/lost %?
Choose your time of day, in which you will enter/exit trades. IE. do you work for the man? If so, during the whole market session? If not, which portion of the session can you be active?
Which market is active at the time you have available to enter/exit trades?

Finding your market niche does not happen by cosmic intervention, it happens by your own design, your own willingness to do the work, and to limit the scope of your focus.
 

alliance

Active member
May 29, 2004
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#10
I apologise in advance that I cannot give due credit to the author/provider of the following 3 documents...coz I don't recall exactly where I came across them tho I'm pretty sure I downloaded them from a T2W thread a couple of months ago....
 

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timsk

Well-known member
Mar 18, 2002
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#11
:cheesy:
One simple little typo' and out pours a whole Pandora's box of jokes. I'm delighted to bring a little cheer into an otherwise dull Sunday afternoon for you all, but now I'm worried that I'm the source of a pandemic affecting the entire T2W community. But this is probably just a mild form of panophobia. ;)

Okay, moving on (please!); take it as read that a trading plan is needed, essential even.
As I've started the thread, I'm happy to be a guinea pig so to speak; so here is where I'm coming from. (This is largely in response to Sulong's comments).
1. I Trade U.S. equities, but only the 7-9pm GMT session as I have a day job.
2. I wish to day trade as the risk of exposure to events / gaps etc. overnight is too great.
3. Ideally, I would make 1-2 trades per evening session, with the aim of capturing the the bulk of the late move of the day.
4. The primary goal is to have a plan that I know works for me and that I can execute. In other words, I want to establish that I have the discipline to 'plan the trade and trade the plan' consistently, day after day. Profits, although very welcome obviously, are secondary to this goal.
Tim.
 

SvenFoster

Active member
Dec 4, 2003
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#13
pkfryer said:
Whats the difference between a trading plan and a trading system?
can't speak for the others pk but for me and system is the approach used to determine entry/exit obviously moneymanagement etc...

A plan brings to the table the above system information as well as, Goals, trading logs, daily tasks, weekly and monthly tasks. Information such as sulongs like when will you trade, when will you determine its going wrong, Education etc.

I think the key thing a plan brings is discipline and focus. Others may disagree.

-ps spell checker doesn;t appear to be working sorry
 

Gardan

Active member
Jul 18, 2001
188
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#14
timsk,
Got to say ,what a great thread, I have been working hard over the last four months on this subject. I hope it develops to it's full potential and we all learn something from it, good luck.

Gardan
 

Roberto

Well-known member
Aug 28, 2004
1,069
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uk
#15
pkfryer said:
Whats the difference between a trading plan and a trading system?
To me, a trading plan is like a business plan for any business. Trading is a business and every business needs a business plan. To me, a "trading system" relates only to the "daily operations" aspect of the business; it explains the operational details of my trades. not the "overall picture". When I'm using a "trading plan" I've got my Director of Daily Operations hat on, not my Managing Director hat or my Financial Director hat.