Sunday, 9 June 2013

Quote for the day

“As traders, we cannot afford the luxury of wishing and hoping because it puts us in a passive relationship with the markets. When we wish and hope, we are shifting responsibility onto the markets for making something happen instead of confronting the conditions and doing something about it ourselves. If we find ourselves wishing and hoping, it is an excellent indication that we don't know what is going on and as a result need to get out of the markets until we do.”- Mark Douglas

11 Steps in Developing a Successful ‘Trading Business Plan’

Every successful trader must have a written ‘Trading Business Plan’ in order to keep disciplined and focused.

Developing a thorough ‘Trading Business Plan’ will help guide your trading. This outline is for those of you who are trading or investing for yourself; those of you who are trading other peoples’ money (maybe a hedge fund, etc.) will need something much more elaborate than this. Please make no mistake about it though…this is VERY IMPORTANT in order for you to become a successful long-term trader or investor.

Alright, the 11 steps below are a brief outline for what needs to be incorporated into your overall ‘Trading Business Plan’:

01. You must have a Mission Statement. What’s your real motivation behind your trading?

02. You must spell out your trading/investing Goals and Objectives. You cannot get from A to B very easily unless you truly know where B is.

03. You must spell out your Trading/Investing Beliefs and Market Beliefs. Please remember this very important statement, “You cannot trade the market. You can only trade your beliefs about the market.” Therefore, it’s a very good idea to identify your beliefs about the market first.

04. Spell out your exact Trading Strategies. How do you go about analyzing the market and what are the key things you look at in your market analysis? What trade set-ups do you use before entry? What are your timing signals for market entry? What is your catastrophe stop loss? Where and when will you take profits? Will you use a trailing stop? Will you scale into the market? What exactly is your trade management system once you’re into the trade?

05. What are your Position Sizing Strategies? This is part of money management and is very important in reaching your trading goals and objectives in terms of profitability.

06. What are your typical Psychological Problems in following your trading plan? What is your plan for psychological management for dealing with these problems?

07. What are your Daily Trading Procedures? What should you be doing on a daily basis, not only to become organized, but to become methodical in everything you do as a trader, on a day-to-day basis.

08. Do you have an Education Plan to Help Improve Yourself on a continuing basis? If not, you should have one. Like anything else in life, you need to be continually working on yourself to become better and better.

09. What is your Disaster Plan? What can go wrong, and how will you deal with each item?

10. What is your Planned Income and Budget for Trading Expenses? This is pretty simple and straightforward; write down everything you can think of and try to be as realistic as possible.

11. How do you Prevent Trading Mistakes and Avoid Repeating Them… if they occur ? Really sit back and think about this and write down any and all mistakes that you might make during your trading. Once you do that, come up with a solution to each potential mistake that you might make so you don’t allow that to happen.

Having a ‘Trading Business Plan’ of this nature is so very important that I rank it among the top requirements for all traders and investors to complete and have. If you don’t already have one similar to this, I highly suggest you start developing such a plan. I can guarantee that you will become a much better and more prepared trader.
By Todd Mitchell