Your business plan is your personal project of successful trading. It includes more than just your goals, but also a detailed plan of, how do you plan to get there. This plan should go beyond your trading methodology.. It should include structuring more than just your trading environment., but for a lifetime. Your brain and psyche are your main trading assets.. How do you plan to protect them throughout the year?
Your business plan needs to be structured, to motivate you to make higher profits on your account. It sounds like a matter of course, but you have to really fight, to get out of every recession. You must have assumptions in your plan. — do not give more than the minimum percentage of profit. Your trading plan should include all the details, such as: which markets will you trade, what strategies will you follow, and what leverage will you use. Only with a trading plan will you be able to avoid emotional trading decisions..
I'm sure, that it's never too late to start thinking about working on a business plan during the current year. It is also never too early to start thinking about drawing up a business plan for the next year.. Because it will take a while, to think about those things, which I am going to talk about and work on your own program.
Trading is abstract and there are so many questions and solutions, which will arise and must be done during the day. Your goal as a trader is, to fulfill your plan and draw conclusions from it. A daily plan helps in maintaining a daily routine, organizations and structures. But before, what do you think about, how to build your daily game plan, you must first formulate a broader annual business plan. During the formation of your larger business plan, you will develop a trading program directly for yourself. Many of the questions, that we receive, refer to, what trading patterns to follow, what time format to use for trading, how to place orders, and in which markets to trade. Your business plan should include all of these questions..
When you design your program, you should think of yourself as your very best customer. Your account is your customer. Your goal should, in the end, consists of, to design the program type, where you can trade multiple accounts, or, think about, would you like to add only one client. You need a very specific type of program, to present to this client, and then, assuming, that they will monitor your trading activity every day, you will be more conscientious about your next program. Leverage and money management will be covered in this "program", like the markets, on which to trade, recessions, types of transactions made, etc.. I will share with you some of the ways, with which I develop my program. Before, than i do it, a business plan includes much more. It should also include goals and motivational factors., just like the rules, basic principles, and plans, to keep you from dangerous deals or places, in which you feel the weakest.
I believe, what, insofar as trader captured by the market, it's hard to choose free time. So it is very easy for me to reach the burning point. I tend to hold too many positions. Taking a position on the last day of the quarter, seems, is my achilles heel. That's why, I make a very clear condition in my business plan for the next year — DO NOT HAVE large positions when entering on the last day of the quarter. If you want to keep yourself free to break a few rules, since you are still developing your business plan, think about these rules. Think, which rules really suit you best. This is just that, why did i say, that it may take a while.
I will tell you the essence of my program, and then you will see, how easy it is to design your goals around your plan. I have separate accounts, one for scalping trades, and one for positional trades. It is now easy to design different targets for each program. For example, if market S&P is the only market, on which you trade, one goal might be, to reach a certain level of activity in scalping S&P. It can form your main program or be designed as a side activity.. If you have a goal to make a certain number of scalping trades per week, you will not demand much from yourself.
You will include position trades or index options in your program? Take a look at your past trading successes. Easy to break, if it is more profitable for you to stick to short term scalping, or how many long-term positions you can really add. I like to keep my scalping activity S&P separately, so for long-term positions I prefer to use futures NASDAQ as a separate market instrument. For deals, domestic futures markets, I try to hold positions somewhere 2 — 8 days. Sometimes I will trade bonds during the day, but I try to play with rollover positions for the next day for most markets. This is my basic program.
so, essentially, I have three separate programs: S&P scalping, short-term swing trading, based on classic chart patterns and long-term positional trading, which may include shares, options, mutual funds etc. You have to think about your combination, that will work for you and be clearly organized in relation to, how are you going to manage your money. Each account must have a certain level of funding and the number of positions, which can be traded.
There should also be basic principles of leverage and money management rules for each type of trade.. Most of the time I don't use my full line.. I trade 1 contract in "x" units of the amount of my invoice. Determine the unit size for yourself. As your account grows, you can add another contract. These things should all be spelled out in your business plan..
As for the goals, you can structure them in two ways. Some people set a dollar-denominated target for their trading activity. I've actually avoided doing this in the past., instead decided to focus on maintaining a certain amount of activity level. I was evaluating, did i do everything, that I could every day and the profit took care of itself. Sometimes setting the dollar amount can be discouraging during periods of downturn or provoke you to execute trades., when nothing sticks. This year, I want to have my biggest trading year of all time - this will be my goal.
But for some people, the best goal might be, to make a certain number of transactions on a regular basis. It helps you achieve bigger goals.. I would like to reach half of my goal in my day trading account and half of my goal in my position trading account. Now the question has come, sometimes profits are unevenly distributed. If you set a goal for yourself to do 3 point of S&P per day for each contract, should you leave, when you do these three points? Not, should not. If you are on a horse and feel confident, you must continue to trade. If your 3 item got you easily, why should you leave? You can make a very good reserve for the next day or even in case of a loss..
But you must have some basic principles. This will serve as your motivation., Firstly, to make a deal! You must have a specific reason to press a key, because it is so often too easy to hold back, being aggressive. Set a goal, which you can not only achieve, but you can also exceed. so, once again, if you are new, beginner with a small account, maybe, your goal will be, to do 8 items S&P per week. How are you going to achieve this? If you have little capital, then you do not want to trade on a longer time frame. You must find 1-2 period per day, where can you enter and achieve 2 points.
You have now broken down your goal into smaller pieces.. How much risk you can take on every trade? When I make a scalping trade, I automatically risk no more than three points. If you decide, that you can't risk it anymore 2 points, you are going to have to be very careful when choosing your site. You must be able to see your risk point before, how do you enter the market. See the market turn, and then enter the market and get as close to that turn as possible. In this way, it could be a "program", where you can start. Now, what can happen, if you start with your scalping program, it will be for a few days, markets can be sluggish or choppy. Maybe, you feel a little behind your goal. But then one day, your 2 paragraph turn into 5 points or you are active and make a few more trades and exceed your goal. OK?
Don't push yourself, to make a certain number of trades every day, but you must have a directive in order to, what would you like to achieve in a month. Then at the end of the month, you ask yourself, how your work fits into your business plan? If it diverges a little, what it takes to be accurate? The biggest things, which prevent the trader from fulfilling his plan: succumb to emotions, forget to place stop orders or stubborn looping on one trade. These are the things, that i know.
But it's possible to make all these mistakes and still keep making money.. Amazing, markets can forgive more, than we think. Only a little consistency is required. So, every month, set your goal to do the best job, than a month ago. Everything, what you have to do is work, to make fewer mistakes.
Some more parts of the plan — save the report and structure. These are equally important parts of your business plan.. And there is why. Daily routines and rituals keep things automatic. Additionally, they help set up your daily game plan (to which we will come next). The trader must get to the moment, when there is only one thing left - to make a deal. At the end of the day, i log all my day trades. It may seem like a waste of effort, since the data has already been entered into the report on my computer, and i just write it down on paper. But this ritual brings me some relief, because I can close making all decisions and do some therapeutic rough work. I relax on mechanical tasks and rough work, because I shouldn't think at this time. This — ritual, which clears my brain of all good and bad, what happened during the day.
I also have sheets, where i register every trade, and lately I've been getting more diligent in doing my paperwork at the end of each day. I used to do this during the eighties, but stopped in the past few years. Part of my business plan for this year includes becoming even more involved in keeping records.. I track the number of declines on each trade and the average holding time for each type of trade. As you can see, you should detail your game as much as possible, to get yourself into the game, increasing the intensity.
The goal is not, to burn yourself is the wrong idea. You don't have to focus on every tick., but rather the opposite. Try to control the market, being free and relaxed. Sometimes the best deals will happen "out of the corner of your eye". For example, you may have observed the market for several days. You did your daily homework, watching the events unfold. Then, when the market starts to act in some way, reaffirming, that your analysis is correct, you should be there.
You cannot force events, but when you are relaxed, you will see them better. The best way to stay relaxed and relaxed is, to be involved in some kind of ritual. Like a tennis player, who tosses the ball up and down several times before, what to serve is a ritual, to stay liberated. The same tricks apply to trading. You can mechanically draw charts fluctuations on paper throughout the day, record periodic tick values or mark extreme price levels.
I hope, what have you got the main idea so far. But here's the thing. — one more example. Person, for whom I worked, when I first traded on the Philadelphia Exchange was a physicist. He spent 1,5 hours there before, how the market opened and was there for another hour and a half after closing. He was very methodical and organized., writing orders in advance. He was quiet and humble, and as I found out later, he was also one of the most successful traders there. He trades so far and no less successfully.
There are some common features, which I noticed among those traders, who do well. They all have a daily routine and rituals.. You have to balance between abstract conceptualization of the process, which the market requires and some material actions.
Your business plan should include creating a daily Game Plan for each trading day.. What strategy are you going to use for the next day? Should the market really start to form a small trading range during the day?? Or is he ready for a breakout — potential trend day? There is a game opening during the morning? For example, is there a morning sale, will there be an opportunity to buy from the depth? Or the rally will be short? Your game plan could include selling from previous highs or buying on a pullback to the hourly moving average.
When managing long-term transactions, you, probably, save them, if you have clear instructions to move the stop order. Write down your stop level and keep moving it as you go, how the market moves in your direction. My favorite way to move a stop order is, to use a two bar stop channel or use hourly support and resistance levels. During a downtrend, I will move my stop order just above the last hourly swing up, but during an uptrend, I will give it more space and move the stop order below the hourly low two levels back. Move your stop order not the last swing down, and one in front of him. Because rising markets are more prone to ABC-type corrections. There is no perfect way to move a stop order — they all have their drawbacks.
Sometimes, trading in another market can be a good diversification, to discourage you from taking profits too early on a position, which works. You must let time work for you in a winning position..
Game plan - business plan — complete structure of the trading environment, just start thinking about a way, which you really follow. Get down to one day level while recording a process. Even if you are a position trader, you shouldn't think about too distant future, you have to plan one day, even if it is — market surveillance process only. Your goal should be, to do a better job, which you are capable of this day. Follow your rules and your game plan for the day. If the market moves in a manner, not foreseen by your game plan, then it's ok. The wrong game plan is always better, than no plan at all. At least, if your game plan is wrong, you will know, where is the mistake, and this already has tremendous value.
You can skip a million trades, but you must not miss that, which you have been waiting for according to your game plan. You can also adjust your game plan throughout the day.. Maybe, you were hoping to sell after the rally in the opposite direction from the resistance level, but the market went through it. It's okay to tell myself: "Since the market did not go, where did I plan, this may imply, that there is a stronger movement in the other direction ". Maybe, then it would signal, that you need to switch and start looking for buying opportunities. You got an idea!
Below is a list of some of the question types, which you can include in your annual business plan. This will prompt you, what is worth working on. Start thinking about putting together a professional program, made up of small tangible parts, which you can implement.
- What methodology, or what models are you going to trade? It's good to have a "library" of preferences, but most people are better at focusing on a niche or a specific technique.
Learn to do one thing consistently well instead, to try to use too many styles. - What markets are you going to trade? If you trade stocks, think about maintaining a “stable” stock set, with whom you work. Don't Grab Too Many Tools, with whom you are not familiar. If you are not very successful, trading any market instrument, why try to trade it in the future?
- What capital are you going to put into your trading account? I have to add something here — refuse to track the percentage of return when evaluating the statistics of your work, such as a percentage of income or loss in your personal account. Concentrate on dollar values instead. What's your dollar tolerance? I, for example, I start to feel unwell after losing a certain amount of dollars. The percentages vary considerably depending on whether, how much money do you have in your account. You can have equity in 1 million. $ and keep 100.000 $ on your trading account, and your situation will be completely different from that of the person, which has 5 million. $ and keeps 100.000 on the trading account. A person with a higher net worth will feel more free, to use different types of leverage. So think in dollar terms — how many dollars do you want to get and are you ready to lose?
- How do you plan to enter, go out, and manage positions? I like to divide my position size in two.. Sometimes I enter the market with the whole volume and then measure in halves.. Another time I start at half and look, when to add the other half. In some positions, I hold half as a core and use the other half for scalping.. Whatever your style, it should be written in your plan.
- What does your plan say about, how to manage recession? How would you rate, when to pause?
- What are your monthly goals? You are going to aim to make a certain number of trades each week, or, maybe, some number of points? Remember, this — basic principles, to measure your progress. Some months will be better, than other months. The end of the month is the right time, to do a periodic review. Most businesses do this on a monthly or quarterly basis..
- Incorporate a daily routine into your overall business plan. How are you going to rate your work each day? Make notes of those things, which you are doing right. Reward Yourself For Small Moral Victories. Pay attention to small improvements, that you do.
- Create a working environment, intended, to make work easier. Eliminate distractions and external influences. Organize your workplace like this, to make you comfortable. Invest in good hardware and superior data delivery.
- Provide conditions, which may discourage you from trading, creating stress, if they arise regardless of you, for example, health, moving, family circumstances, etc.. Trading is a work-oriented discipline. If you cannot perform it well, you better refuse altogether. If a tennis player has severely sprained his ankle, he cancels the match.
- Record Keeping - Assess Yourself, your daily routine, your structure and homework. Are you doing research or do you have a way to record results? What research is included in your program or plan? My problem is, that I am postponing too many projects. I have to rationalize this to myself. Or, i am inclined, doing research, leave late at night and come too late. After that, I feel somewhat uncomfortable all day.. My business plan includes bedtime. I promise myself to stick with it.
- Reward! You must have outside interests or hobbies, to take a break from the markets at the end of the day. You must afford something, what do you really want. If you spend money on yourself, you must throw away all thoughts of poverty. Evaluate yourself at a million dollars, and you will soon be worth it. I've already got something in mind, if i meet my goals next year.
- And the last, how do you plan to continuously improve yourself? Treat yourself like a person, health wise, work and life. How will you continue to advance in life? You know the old saying — if you don't go ahead, then you go back? Educational development like books and courses is very important, but do not neglect spiritual development or external projects, maybe you should open your own website, start your own sales network, write your own book about your experience in trading and more.
All of the above questions are more important to your long-term success in this business., than any trading indicators or setups! People don't lose money from bad trades. They lose money from becoming slobber in their trade and slobber in their habits and lives.. They allow emotional trades to creep into their program., because they haven't done their homework and are not ready. Your business plan is a contract directly with yourself. This — the contract, how to view yourself as your best customer. Surrounding yourself with basic principles, rules and complete structure can be a means, which will free you from work anxiety and give you confidence, that you can raise your trade to the next, higher level.
author: Linda Bradford Raska
A source: fxmag.ru
